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State pension will run out without NIC increase, Govt actuary warns

Funding for the state pension will be depleted by 2032 without a rise in National Insurance Contributions, the Government Actuary’s Department predicts.

In order to avoid a deficit, GAD says that a 5 per cent rise in NICs could be needed.

The numbers assume current policy such as the triple-lock holds and the state pension age rises in line with expectations.

Aegon pensions director Steven Cameron says: “What many people may not realise is there’s no big pot of money set aside to pay future state pensions. Instead, they are funded on a ‘pay as you go’ basis meaning future state pensioners are reliant on the NI contributions of future workers to pay their pensions, creating the potential for intergenerational tension. There’s always a trade-off to be made between state pension age, the yearly amount of state pension paid out, other benefits NI pays for such as the current hot topic of social care, and at what rates NI contributions need to be set to cover these costs.”

AJ Bell senior analyst Tom Selby says that the figures paint a “grim picture” for the future of the state pension, noting that other options to mitigate pension spending including further increasing the state pension age or reducing the value of the state pension appear unpalatable.

He says: “The harsh reality is that, as demographics bite and the Baby Boomers flood towards retirement, the cost of the state pension will inevitably balloon.”



Shadow pensions minister Alex Cunningham resigns

Labour MP Alex Cunningham has stepped down as shadow pensions minster his office has confirmed. The MP for Stockton North has been shadow pensions minister since October 2016 and has been an advocate of more transparency on investment charges. Cunningham’s office did not provide specific details about why or when he decided to step down, […]


David Gauke leaves DWP in reshuffle

Former secretary of state for work and pensions David Gauke has been replaced in the role by Esther McVey as part of an executive reshuffle this week by Prime Minister Theresa May. Gauke was appointed to the Department for Work and Pensions in June 2017. Prior to that, he was chief secretary to the Treasury. […]

Tapering of annual allowance – adjusted and threshold income

The definitions of adjusted income and threshold income used to determine whether, and to what extent, someone’s annual allowance will be reduced can be confusing.  Here we try to make sense of it all. The annual allowance will be reduced for high income individuals from 6 April 2016.  Our previous article Tapering of annual allowance […]


Waspi women should be given £15,000 each, Lib Dems say

The Liberal Democrats have called on the Government to correct the “injustice” faced by the Women Against State Pension Inequality Campaign by giving them £15,000 each. Stephen Lloyd, the Liberal Democrat spokesman for work and pensions says the Government should do so immediately. Lloyd argues successive administrations have failed to help women who are set […]

The calm after the storm

Craig Inches, Head of Short Rates and Cash at Royal London Asset Management, reflects on the muted tone of gilt markets over the past week following the recent turbulent activity in this sector. Read the article here  The value of investments and the income from them is not guaranteed and may go down as well […]


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Andy Robertson-Fox 10th January 2018 at 9:29 am

    I wonder if GAD have incorporated in their calculations the current £580 million required to end the discrimination against the frozen pensioners?

    Of course GAD is only responsible for advising the government of the potential shortfall but for the government to determine how any such shortfall is to be met

  2. Something is terribly wrong here with our nation’s finances. Governments are supposed to protect the old, ill and vulnerable yet we have the lowest state pension ( and chronic underfunding for social care needs. This is embarrassing for the UK. We need to have a national debate on where the government should best spend the nation’s money. WASPI is the result of another embarrassing pensions cock-up by the government. We need realistic pensions to be there for hard-working people when they retire. Instead of always asking for more tax, the government should realign its spending plans and do it quickly.

    • Yep Bruno – the lowest state pension in the whole of the OECD. (as a proportion of average earnings). There is a fund? That’s news to me – I thought it was all spent and that NI just went into the general tax pool. To quote Aneurin Bevan:
      “The secret of the National Insurance fund is that there isn’t one”

      All Governments have been lying through their teeth for years about pensions. The old SERPs wasn’t a bad idea, but in line with policy they scrapped it and have been watering down the State Pension ever since.

      Instead they dragoon people into the absolutely lousy AE where they have to not only put up with a rubbish pension and an even worse service, but now they take the investment risk too.

      Want to REALLY fix it?:

      1. Increase NI by 5%
      2. By next year AE will be 8% (3% ER and 5% EE) so scrap AE and add this to the NI as well. – that equates to a 13% increase.
      3. Ensure that this money is properly ring fenced and overseen by a totally independent body. (The FCA anyone?)
      4. Anything so far accumulated in the AE plan is transferred in cash to the NI fund.
      5. SERPS is reinstated.
      6. The aim is to provide a State Pension of at least 50% of average salary.
      7. Those on finally salary schemes with a pension income (or projected pension income) of over £40k p.a don’t get the State Pension.

      Do you recon that will do some good?

      • Andy Robertson-Fox 11th January 2018 at 8:59 am

        The opening balance of the National Insurance Fund for the year 2017/18 was £21,934,751 according to the Accounting Officer, Jon Thompson who signed the accounts on 14th October 2017.
        Bevan, of course, was wrong there is a fund and what he should have said was that there was no Investment Fund.

  3. The baby boom is not a new phenomena, its been about 70 years in the making but this is not the problem per se.

    The problem is that successive governments have ignored it, just as they are still because they want to be popular and thus re-elected.

    It’s child’s play really or maybe Mr Micawber – “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

    Ah well, at least the MPs have a nice self awarded pension

  4. No no no…… NO !!!

    The state pension is a Ponzi Scheme……feeding it only exasperates the inevitable

  5. Well, the government under Cameron found 13+ billion to give away in overseas aid.
    Whilst giving aid where needed is commendable it must be properly controlled and used for essential aid not for a girl band in Ethiopia or such stupid reasons. Some aid was given to Mugabe where pensioners have a frozen pension. Why deny our own pensioners for a dictators whims ?
    Certainly the pension system must be sorted out and fairness granted across the board with the discriminative areas dealt with as a priority.

  6. This is because successive Governments have spent NICs on other things, rather than just the State pension. They need to redefine the split between tax and NICs, and what it’s spent on.
    If they try to means-test State Pension for retirees in the next 15-20 years, they will scupper many peoples retirement plans, with no chance to make up the lost State Pension, unless they give us back our 35years worth of NICs!!!! It would be a brave Government that didn’t.

  7. NIC are a dishonest scam. Abolish them, and increase general taxation to make up the short fall. In reality we have a basic rate tax of 32%, let’s be honest enough to admit it, and have a debate about whether it should actually be 37% in order to keep funding a state pension and kicking the funding crisis another 20 years down the road.

    Let’s face it, if you’ve only ever had 63% of your money this magic state pension of 50% of average earnings will be a pretty good deal for anyone on less than average earnings.

    Simplify the system, and be honest. It isn’t an easy pill, and requires education, but it is the only one which provides a chance of a sustainable solution.

    We need productivity increases to fund a better standard of living for all. If you are trying to split the cake so widely that no one gets a proper slice then everyone gets angry – policy has to focus on making the cake bigger, and splitting it more fairly – with the public debate being on what constitutes fair – as everyone has a different idea of what fair means.

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