The UK state pension faces a potential overhaul as experts warn of unsustainable costs
London: A think-tank has raised alarms about the UK’s state pension. They say it could become unaffordable by 2035. That’s a big deal for many folks relying on it.
Back in 2021, the total obligation for the state pension was £8.9 trillion. And it’s only going to get bigger. The triple lock system is a big part of that problem.
The state pension is funded by current tax revenues. This means working-age people are carrying the load. The Adam Smith Institute pointed out that this creates a real economic burden.
For example, someone born in 1956 might get £291,000 more than they ever paid in. That’s a hefty sum, right?
Demographic trends are also a concern. By 2040, 22.7 million people will be claiming benefits. But only 34 million working-age folks will be around to support them.
The think-tank predicts 2035 will be a breaking point. The state will spend more on welfare, especially the state pension, than it will receive in National Insurance contributions.
Currently, the state pension costs the UK £125 billion, supporting nearly 13 million retirees. This figure could rise to £150 billion in the next decade.
But there are some ideas on the table. One suggestion is to scrap the triple lock altogether.
Sir Steve Webb, a former pensions minister, thinks a new system could pay pensioners a fraction of average wages instead. He believes the triple lock can’t last forever.
He mentioned that there might come a time when even pensioners want funds spent on other priorities. It’s a valid point.
Another idea is to boost immigration. More workers mean more tax revenue, which can help fund the state pension.
Research shows immigration adds about £3.3 billion to the Treasury each year. Nina Skero from CEBR says immigration is crucial for supporting the state pension system.
Plus, immigrants tend to be of working age, contributing more through taxes while using fewer public services. It’s a win-win situation.
