Falmouth Packet Business Jun ’18 – What is the future of the state pension ?

What is the future of the state pension ?

The state pension will be 109 years old this year – so what will the next 109 years look like for you, me, our children and grandchildren – whilst I do not have a crystal ball the figures simply don’t add up.

Even though the state pension offers the lowest replacement income relative to average earnings of any organisation for economic co-operation and development it does not bode well for the future.

The state pension is funded by National Insurance contributions which pay straight from workers to the retired, there are no savings and is run like a current account with periods where an overdraft is required. Indications are that the projected number of people of state pension age compared to the working population is anticipated to increase, placing a larger strain on public finances.

The position is heightened as money coming in is in line with earnings, whilst pension increases with inflation and the triple lock; placing a greater strain on the system.

Taking dramatic changes such as stopping the state pension or means testing would be catastrophic for any political party which is why we have seen some changes such as extending the state retirement age. This is likely to change again with current proposals being linked to average life expectancy. As the government website states https://www.gov.uk/state-pension-age “the state pension age is under review and may change in the future. “

The introduction of auto-enrolment was brought about to ensure that individuals provide for their future and reduce reliance and burden upon the state.

We are likely to see further changes including the triple lock and further extension to state pension age, whether this is sustainable over the longer term is doubtful. Regardless of any future changes relying upon the state pension to provide financial support is not a sensible strategy and a case of taking matters into your own hands and making your own arrangements.


This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Sarah Williams of W.T Independent Financial Planning is an Appointed Representative of Vision Independent Financial Planning Ltd

Article June 2018