With the state pension expecting to cost around £97 billion for 2018/19, Partner and Actuary at Quantum Advisory, Stuart Price, says that the young should not rely on receiving this handout in its current format and should ensure they are personally saving for their retirement now. Stuart says: “The cost of the government providing the state pension is close to £100bn a year. Compare this to the seemingly astronomical cost of running the NHS at £126 billion for 2018/19 – and you can see why the government has had to continually raise the state pension age and further detrimental changes will be made in years to come.
“I think partly to blame for the high cost of the state pension, along with people living longer, is the triple-lock. The triple-lock was introduced to help many pensioners get out of poverty and it has no doubt achieved this, which is a good thing. This rule guarantees that once in payment, a person’s state pension will increase by the greater of inflation, average earnings or 2.5% every year. Recently, with low inflation and low average earnings, the increase has been 2.5%, which alone cost an extra £6bn in 2016. Although the Liberal Democrats and SNP are in favour of retaining the triple lock, I would urge the government to look at the facts and see that it has served its purpose and is simply not sustainable in its current format, and not fair on younger people – young families especially – who are seeing their wages increase only marginally each year and yet, pensioners’ income is going up significantly more.
“Had the triple lock not been in place, and the state pension increased in line with inflation, the government could have saved £2bn in 2016.
“With this in mind, I think it is only a matter of time before the government has to make a stand and reduce the annual increases – however unpopular it may be and further detrimental changes will no doubt be made in the years to come to ensure that the state pension remains sustainable.”
Stuart Price, Partner and Actuary at Quantum