The cost of providing the State pension will almost double over the next twenty years, according to a recent forecast from the Department for Work and Pensions.
At present, the cost to taxpayers of supporting the Basic State Pension is £63 billion per year. However, this is expected to have risen to £121 billion by the 2032/33 financial year, meaning it will nearly have doubled in just two decades.
Some people believe that the State Pension is paid out of some kind of fund that has accumulated from National Insurance contributions. No such fund exists: all that money has been spent. State pensions are paid from current tax income paid year on year by taxpayers.
The main driver of increased costs for this universal benefit, which is currently worth £107.45 per week, will be the ageing of Britain’s population. An extra 2.5 million people are expected to be receiving the Basic State Pension in two decades’ time, as the number of people over retirement age will grow from 13 million today to 15.6 million.
All these people are already alive – they are today’s 40- and 50-year olds – so this forecast is very likely to come to pass.
“Death by a thousand cuts”
Speaking to the Daily Mail, Laith Khalaf, a pension analyst at the financial services firm Hargreaves Lansdown, warned that today’s young people should brace themselves for the impact of these financial challenges:
“How on earth are we going to afford all this? The answer is we are not. The Government is almost certainly going to have to raise retirement ages and water down State pension benefits.”
He added that younger workers will face “death by a thousand cuts to their State pension entitlement” as the government seeks to balance its books.
In response to a looming crisis over the costs of the State pension, the government has already begun a process of increasing the age at which people become eligible to start claiming it.
This is currently 65 for a man, and 61 and two months for a woman. Historically, women have qualified for the State pension at a younger age than men, although this disparity is gradually being phased out. Current plans will see the State Pension Age for both genders rise in tandem to 66 by 2020 and 67 by 2028, with further increases expected after that.
However, these raises could be brought forward, as further increases in life expectancy for both genders are continuing to exacerbate the problem.
Full article is here:
www.if.org.uk/archives/2713/new-warnings...ost-of-state-pension
