Stuart said: “The cost of the government providing the state pension is close to £100bn a year. We operate a ‘pay as you go’ state pension system in the UK whereby current workers’ National Insurance (NI) contributions fund today’s pensioners’ state pension. It just about works at the moment, however with people living longer and the gap between the number of pensioners and people in the workforce decreasing, it’s only a matter of time before the system can no longer function.
“For the state pension to remain sustainable I see three viable options; the amount of state pension will have to reduce; there needs to be an increase in taxes or NI contributions to provide additional funds to pay the state pension; and the age at which you can collect your state pension needs to increase beyond the planned 68. I appreciate none of these choices would be popular, but sadly they seem inevitable given the situation.
“The government also needs to seriously consider the viability of the triple-lock which guarantees that once in payment, a person’s state pension will increase by the greater of inflation, average earnings or 2.5% every year. The triple-lock was originally introduced to alleviate pensioner poverty, but with next year’s increase set to be 3.9% due to earnings growth, it now seems almost unfair for such big pension rises.
“I think the one good thing to come out of the state pension struggle is the fact that people are now aware that they need to be investing in their own private pensions and cannot rely solely on the state to provide their income in retirement. Automatic enrolment (AE) has been a resounding success with a record number of people in the UK now saving for retirement. Building on AE’s feat, I believe the government should include an option to ‘opt down’ rather than opt out completely for those individuals who can’t afford the minimum contribution. AE also needs to open up to the self-employed and workers on a lower income and further increases to the minimum level of contributions are also urgently required.
“Although the situation needs addressing immediately, I fear no government will want their name associated with what will inevitably be hugely unpopular rulings.”
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