Adrian Boulding, Director of Policy at NOW: Pensions: “The warning from the Government's Actuary Department demonstrates just how precarious the state pension really is.
“Increasing National Insurance contributions by 5% could go some way to mitigate this issue. But increasing NICs is easier said than done and raises uncomfortable questions around intergenerational fairness.
“Research* we conducted with millennials revealed one in five (22%) 18 – 30 year olds are pessimistic about the future of the state pension and don’t believe it will exist when they retire.
“To protect against an uncertain future, having workplace pension savings is essential which is where auto enrolment has the potential to make a big difference.”
Calum Cooper, Partner at Hymans Robertson: It is not surprising that the Government Actuary Department has reached this conclusion that state pension funding levels are dwindling. The current system is dangerously unsustainable when you consider how technology and rising life expectancy could transform our working landscape over the next decade or two. The UK currently spends £100bn p.a. on the State pension and that this is expected to double over the next 20 years and double again in the following 20 years, it is clear that the current system needs to change.
“The chances are that our working landscape will look radically different over the next few decades. Life expectancy is continuing to rise faster than the State Pension age meaning many people will feel compelled to continue working well into “retirement”. In fact, our own longevity analysis found that the state pension age should now be at 74, if it had kept pace with life expectancy from the second world war.
“However, all of this could be swamped if the predicted potential for technological unemployment by AI comes true. The Bank of England and PwC have estimated that 1 in 3 jobs are currently in danger from automation. Clearly there is a wide range of outcomes but this outcome would be massive and would have a devastating impact not only on NI financing but would cause demands on state support to reach an all-time high. Perhaps it’s time to think beyond the State Pension and look towards something more age-agnostic.”
Government Actuary’s Quinquennial Review of the National Insurance Fund as at April 2015
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