The International Monetary Fund has warned that the state pension age will have to increase in the UK, and may be subject to future means-testing.
This report highlights specific financial challenges facing the UK, particularly int he light of Brexit. As well as raising the prospect of means-testing this state benefit, it also points out that the cost of the triple lock is unsustainable over the longer term.
Given the ageing population it may come as no surprise that the IMF is warning of future increases. But pension experts say warning about the long-term affordability of the state pension raises the prospect of further tax or national insurance increases, as well as more fundamental reforms.
Aegon’s pensions director Steven Cameron says: “With people in the UK living longer than ever before, the age from which state pension is paid needs to be kept under careful review to ensure it remains affordable long term.
“Unlike ‘funded’ private and workplace pensions, there is no fund built up to meet future state pension payments, so it’s those who are working who meet the costs year on year through National Insurance contributions.”
He adds: “Early this year the Government’s Actuary Department (GAD) published analysis on the long term outlook for the NI fund, highlighting the need for a significant rise in NI contributions even with the scheduled increases to state pension age.
“The ageing population is creating concerns not just over the future affordability of the state pension but of how to meet increasing funding pressures on the NHS and to pay for spiralling social care costs.
“Of all the suggested solutions put forward by the IMF, the most contentious is making state pensions means tested, which could mean those with earnings or assets above a certain level no longer qualify, even if they have paid NI throughout their working life.”
