UK State Pension - will it still exist or run dry ?

Daffodil1234

Hello All

I recently came across some articles including this one:

https://www.boringmoney.co.uk/learn/articles/will-there-still-be-a-state-pension-when-i-reach-retirement-age/

Extract from article below - this suggests that the state pension fund could run dry, unless either (or both) workers pay much more in, or else retirees receive less from the fund.

I hadn't come across this specific estimate from GAD before and wondered what people make of it.   What is realistically the most likely thing to plan for ?  I'm assuming that my state pension (due to begin age 67, I'm now 53)  will in practice be a smaller amount comparatively than the same amount that retirees receive today.

"Will the state pension come to an end?

The Government Actuary’s Department (GAD estimates that the UK’s state pension fund could run dry by 2033. Quite simply because we’re paying out more than we’re putting in.

The money for state pensions comes mostly from National Insurance contributions, and currently there are 1,000 contributing workers to every 310 claiming pensioners. By 2036, this is expected to rise to 1,000 workers to every 360 pensioners. If we’re already going overdrawn now, this could be the straw that breaks the Treasury camel’s back.

Of course, nobody knows for sure what will happen, so don’t start panicking yet"

Thrugelmir

If you search the forums the topic has been discussed previously on numerous occcasions. (The article you reference to is from 2019). 

TimSynths

Plan and save for it not being there when you retire and if it is- happy days.

resk

TimSynths said:

Plan and save for it not being there when you retire and if it is- happy days.

I understand this point and it is a very common one.  I just think it seems a bit too simplistic, and possibly pessimistic.  For every thing else about personal finance and long-term planning, people seem happy to say "plan for the current rules because it's impossible to predict what the future rules will be" in regard to income tax rates, the 25% tax free lump sum, access age, universal free healthcare and loads of other stuff.  However when it comes to the universal state pension that has existed for 100 years, for some reason people revert to bloke-down-the-pub "you can't trust the gubmint" conspiracy theorist stuff about "the money running out".  

Every generation thinks they're the last before armageddon, and I'd say there's a fair chance that 30 years ago people were confidently informing my dad, now 68, that he had no chance of ever getting his state pension because the country is broke!    

Daffodil1234

Thanks all for your comments.

I'd be interested in any links to the previous discussion mentioned on this forum - a search this morning didn't turn up any hits for me when I looked for previous discussions.  However as it's a wide topic, could just be that my search criteria weren't the right ones.

My interest in this is purely as I'm updating a retirement planning spreadsheet and aiming to know what estimate I might put in for my state pension.  I'm certainly not looking to launch conspiracy theories which is why I linked to a well known money advice website (boring money).

I'd welcome anyone's thoughts on how they are planning for their estimates of what they might receive.  My current plan when setting up my revised spreadsheet is going to be to use the current state pension number, but not to increase it annually by as much as the current triple lock.  So rather than going up by (say) 2.5%, in my estimate perhaps I would raise it by 1%.  However if other people have different / smarter ways when planning, it would be useful to hear about them.

SouthCoastBoy

I can't see the state pension disappearing, it would be an election disaster. The state pension age may continue to be pushed out. Reading the following report may be helpful to understand future plans. https://www.gov.uk/government/publications/state-pension-age-independent-review-final-report

SouthCoastBoy

Daffodil1234 said:

Thanks all for your comments.

I'd be interested in any links to the previous discussion mentioned on this forum - a search this morning didn't turn up any hits for me when I looked for previous discussions.  However as it's a wide topic, could just be that my search criteria weren't the right ones.

My interest in this is purely as I'm updating a retirement planning spreadsheet and aiming to know what estimate I might put in for my state pension.  I'm certainly not looking to launch conspiracy theories which is why I linked to a well known money advice website (boring money).

I'd welcome anyone's thoughts on how they are planning for their estimates of what they might receive.  My current plan when setting up my revised spreadsheet is going to be to use the current state pension number, but not to increase it annually by as much as the current triple lock.  So rather than going up by (say) 2.5%, in my estimate perhaps I would raise it by 1%.  However if other people have different / smarter ways when planning, it would be useful to hear about them.

I make the assumption state pension will keep up with inflation when planning. However this year that's not happened, if that trend continues over the next couple of years I will amend my spreadsheet, but not too worried about it at the moment

QrizB

Daffodil1234 said:

Hello All

I recently came across some articles including this one:

https://www.boringmoney.co.uk/learn/articles/will-there-still-be-a-state-pension-when-i-reach-retirement-age/

Extract from article below - this suggests that the state pension fund could run dry, unless either (or both) workers pay much more in, or else retirees receive less from the fund.

What is realistically the most likely thing to plan for ?  I'm assuming that my state pension (due to begin age 67, I'm now 53)  will in practice be a smaller amount comparatively than the same amount that retirees receive today.

If you're 53, your state pension age is very unlikely to change so it's reasonable to plan to receive it from age 67.

The current Triple Lock is unsustainable in the long run (taken to extremes, eventually pensions end up greater than GDP) and is vulnerable to rare events like the one we've just had.

Over the next 14 years I'd expect the NSP to grow faster than CPI but for planning purposes I'm treating it as simply tracking inflation. Any growth is a pleasant bonus.

Albermarle

SouthCoastBoy said:

I can't see the state pension disappearing, it would be an election disaster. The state pension age may continue to be pushed out. Reading the following report may be helpful to understand future plans. https://www.gov.uk/government/publications/state-pension-age-independent-review-final-report

This is the main point . Any Government reducing or removing the state pension would find themselves out of office at the next election and in the political wilderness for many years . Older people vote in much larger numbers than young people.
Just look at the Triple Lock - it means effectively the State pension is increasing faster than wages ( apart from this year ) . It was only put in place by the Tories, so more older people would vote for them .

Of course there could be some fiddling around the edges, as it is a very expensive for the government to fund , but any significant reduction seems highly unlikely. 

Silvertabby

Before the 1997 general election, which Cherie (Tony) Blair won by a landslide, there was a rumour doing the rounds claiming that the Tories were going to abolish the State pension.

Even some those already in receipt of their pensions panicked, and I did wonder how much of an effect that much repeated rumour had on the election results.  Once someone gets an idea into their heads, right or wrong it can be very difficult to shift it.  As an example, a neighbour's teenager called me a liar when I told him that it had been Tony Blair's Labour who had introduced university tuition fees back in 1998, because "Labour would never do something like that - it was definitely the bleep Tories".

Any government that tried to abolish the State pension would find themselves unelectable for a least two generations.  I can't even see the State pension being made means tested - I know the Australian State pension is, but think that was the case right from day 1.

joep2

It'll be means tested with the state pension kicking in only when our accrued private pension cannot support a living wage.