Future of state pension thrown into doubt as UK faces 'much larger pension bill'

 The future of state pension could be in doubt (Image: GETTY)

THE GOVERNMENT may face tough decisions over the state pension as the British population gets older, with a fresh warning being issued this week.

By MARK OLDACRES

An estimated 13.6 percent of boys and 19 percent of girls born in the UK in 2020 are expected to live to at least 100 years of age, figures from the Office of National Statistics (ONS) released on Wednesday show. This is projected to increase to 20.9 percent of boys and 27 percent of girls born in 2045

.While life expectancy improvements may be slowing down, the population is continuing to age, and this could have big implications for state pension policy.

In mid-2020 there were an estimated 11.9 million people of pensionable age in the UK. This is expected to grow to 15.2m by mid-2045.

In comparison the working age population is projected to grow by a much slower rate from 42.5 million to 44.6 million.

She explained: “We’ve seen state pension age increase rapidly in recent years to accommodate this, but the situation is not so simple anymore.

“There is growing discussion as to whether future increases should be brought in quite so quickly as longevity does not seem to be increasing at the same rate it once was.”

She added that there could be wider implications for people’s retirement planning as well.

Ms Morrissey continued: “Living to 100 is a huge positive but how can it be financed? If you start a pension at 22 and retire at 65 will you really have accumulated enough to potentially last you another 35 years?

She concluded: “There are no quick policy fixes and people must do all they can to boost their pensions and investments so they are as prepared as they can be.”

Andrew Tully, technical director at Canada Life said the data signals a "significant shift" in the make-up of the UK population over the next century.

He added: “The change in proportion of working age to pension age population is stark, while the amount of births is set to fall over the same period.

“The data leaves some profound questions for future policy makers. While the basis of our tax and social care system might work with today’s demographics, this won’t be the case in the future based on these projections.

“The future of the state pension in its current form will be called into question.”

The old-age-dependency ratio, which displays the number of people of pensionable age for eve 1,000 people of working age, is projected to increase from 280 in mid-2020 to 341 by mid-2045.