Who pays for the pension shortfall?
06 June 2018
In John Walbaum’s New Year’s eve blog he said “The gold-plated pensions generation owes it to the next to create an equitable and sustainable way of providing for income in retirement.”
The latest numbers published by the Office of National Statistics (ONS) show that the UK has accrued pension liabilities of £7.6 trillion – rights that have been built up in the past but not yet paid. This is a hefty bill that needs to be paid to cover the shortfall from the past, which will have to be met by the workers of tomorrow. These same workers also must worry about saving for their own pensions, paying off education debts and struggling to get onto the property ladder.
Government advisers have been warned that the state pension will run out by 2035. According to reports from the Government Actuary’s Department the fund which takes in national insurance contributions and uses them to pay state benefits, is under strain from the UK’s ageing population and will reduce from around £25bn today to zero by the mid-2030s.
National insurance contributions are paid by employers and employees and are paid into the state pension fund to secure their entitlement to future state pension payments. The Actuary’s Department have said that to “continue paying the state pension, national insurance rates would have to be around ‘5% higher’ for the fund to break even.”
For more information read John Walbaum’s article.