One in seven pensioners in the UK relies solely on their state pension to pay living costs with each retiree collecting up to £160 per week. But can the government afford to fund state pensions?
According to the European Union, 7.4 percent of the national income of the UK will be spent on pensions in 2020. Over the last couple of years, National Insurance contributions have failed to cover the cost of pensions. In 2016 a treasury grant of £9.6bn was needed to bridge the deficit.
Since its introduction in the early part of the 20th century, people claiming the allowance has gone up from half a million to thirteen million. To fund the State pension, it currently costs the government around £100bn per year. But will it be sustainable in the future? Experts predict that by 2030, that figure will double to £200bn and reach 400bn by the year 2050.
To reduce spending the government has announced that they will raise the State Pension age to 68. It was originally proposed that the change would be implemented by 2044. This date has since been brought forward to 2037. Those affected are those born between 1970 and 1978.
TUC General Secretary Frances O’Grady responded to the announcement by saying “Hiking the state pension age risks creating second-class citizens.”
She went on to say that “In large parts of the country, the state pension age will be higher than healthy life expectancy. And low paid workers at risk of insecurity in their working lives will now face greater insecurity in old age too.”
She proposed “Rather than hiking the pension age the government must do more for older workers who want to keep working and paying taxes.”
Andrew Colyer-Worsell, a senior pension adviser from Fix My Pension, said, “there is still time for those affected by the rise in state pension age to do something about it. In these times of uncertainty, saving into a personal pension is imperative.”