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IMF: UK faces £750bn pensions time bomb

The International Monetary Fund has warned the UK it faces a £750bn pensions time bomb as life expectancy rates grow faster than expected.

The IMF says governments and the financial sector have consistently understated how quickly lifespans will rise by around three years, a gap which could make public finances unsustainable.

The Washington-based firm’s report into longevity risk says it is not unreasonable to assume the entire cost of this gap could fall on the UK taxpayer and the country’s public debt could rise from 76 per cent of GDP to as much as 135 per cent – effectively adding an extra cost of £750bn to national debt by 2050 to pay for the increased costs.

Latest figures on life expectancy from the Office for National Statistics suggests that males born in 2010 will live an average of 78.2 years, while females will live an estimated 82.3 years. Approximately one third of children born in 2012 are expected to live until 100.

The extra costs would come from state pension and public sector pensions. The report also says part of the increase would come from the state having to rescue failed private sector schemes, which it says are equally unprepared for a rise in life expectancy.

The IMF has urged governments to tackle the problem now before it is too late and suggested a further increase in retirement ages, higher contributions into pension pots from employers and employees, and smaller payouts to those in old age.

The report also said countries should consider linking the retirement age to life expectancy – an option being explored in the UK.

The state pension age is already being increased to 67 for men and women by 2028, and to 68 by 2046.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. There are so many people that benefit from the many over-generous pension schemes in the UK that no government dares to tackle them. Instead they fudge the figures & state that all is fine & affordable. Nobody wants to face the truth. Instead the burden is passed down the line to today’s children, who I imagine will not be thanking us in the future.

  2. And the rich sit back smugly knowing that this will have no effect on them what so ever. When will people wake up and realise that the capitalist system only helps the lucky minority.In competition you have but one winner and many loosers, time for a change I think.Now wait for the privaledged few to denounce me as being a communist as if that is a bad thing.

  3. Simon’s comments are right. Whilst the public sector may have complained about recent changes to pensions – we must get pay to you get what you pay for arrangement with pensions. In the UK were creating long term haves and have nots. The back lash against the conservative elderly will not be pleasant if these issues are not rebalanced.

    Ultimately its not going to be about pension ages, but how we live our lives and who looks after us. Its tough, but most of the rest of the World lives with this reality on a daily basis.

  4. The Government needs to immediately recoup the monies from the greedy rich tax dodgers in this country. Fraud is a criminal offence. There are billions and billions of pounds to be recouped. Go on do it!!!!

  5. Just increase the retirement age bit by bit until you reach age 70 by 2050. Problem solved.

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