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Get your state pension at 70? Wishful thinking...

It isn't a shock that the state pension age may need to rise earlier than planned, the surprise will be if we even receive it at all.

Get your state pension at 70? Wishful thinking...

The Cridland Report has reignited fears amongst thirty-somethings that they will have to work to the age of 70 before they receive a state pension

Between 2044 and 2046, the state pension age is due to rise to 68 for those who were born after 1978. However, a new report by John Cridland has recommended that the new state pension age should be introduced seven years earlier and increased to 70 for those of us who are in our thirties.

The government-commissioned report will prove frustrating for those who are watching their pension age pushed further into the distance. However, this was to be expected. When the modern welfare system was created post the second world war, the average life expectancy was 62 years. That means that if you received your pension at the age of 60, the state would only have to pay out for two years. Not exactly a big financial burden for the government.

A man who is 65 years old today can expect to live to 90, and a woman of the same age to 93. This equates to a huge financial burden for the state.

We’re all living longer, so is it any wonder the state pension age is rising? Frankly, I am surprised it hasn’t increased faster. I’m even more surprised by the government’s optimism that I’m going to get a state pension at age 70 - because I don’t think I will.

I’m not relying on any state pension to fund my retirement because part of me doesn’t believe that it will still exist. If it does, it will be means-tested and offered to those who genuinely have no other savings or assets, such as property, to fall back on.

You may think I’m pessimistic but I would suggest that I’m being realistic. We’re moving further away from a society where the state has our backs, towards one of self-reliance and self-funding; why would pensions be any different?

The number of 85 year olds is set to double in the next 20 years, and those living to 100 has quadrupled in the past 30 years. All of these people will need access to pensions, healthcare and one in four will need social care. Where will the money come from?

I'd also like to know where the government will find the money to pay for my pension, and keep paying it for 30 years?

The fact is I don’t trust that the government has the resources to look after me during my old age (not that you can really live on the state pension anyway), so I have two options: work until I drop or save for my future.

I don’t fancy working until I drop, no matter how much I enjoy my job, which leaves me with one option: save.

If you’re in your twenties and thirties now, rather than being irritated that you have to work until 70 to get your state pension (if you’re lucky), think about when you want to retire. I’m guessing it’s before the age of 70, so that means you need to start saving now.

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9 comments so far. Why not have your say?

Stephen B.

Mar 24, 2017 at 17:14

"When the modern welfare system was created post the second world war, the average life expectancy was 62 years. That means that if you received your pension at the age of 60, the state would only have to pay out for two years"

I haven't checked the numbers, but I doubt that's correct - 62 is likely to be the life expectancy *at birth*. Expectancy at age 60 was probably more like 10-15 years. During the 20th century most of the increase in overall life expectancy came from a reduction in child mortality and early death due to accident and disease; in the last few decades it's been more a result of a reduction in deaths from cancer, heart disease and stroke which are much more relevant to the time spent as a pensioner.

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Norman E

Mar 24, 2017 at 19:44

Stephen B is right. There was a time when manual workers who actually reached retirement age (originally 70, later 65) were lucky to live much longer, That has not been the case for many years, partly its the success of the NHS that is responsible, but the idea that the State Pension has just become unaffordable is nonsense. It had been a ticking time bomb for the last 50 years and we are only just waking up to the fact that it cannot be sustained in its present form.

Unlike occupational pension schemes in the private sector there is no fund of investments to pay for the State Pension, or for public sector occupational pensions, and neither are sustainable from taxing a workforce which will become outnumbered by pensioners. The first thing the Government needs to do is tackle the over generous and largely unfunded public sector pension schemes.

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Mar 24, 2017 at 20:34

Agree with article and I also felt the same about state pensions in my early 20's now 30 years on I'm delighted I saved into a pension at an early age.

Unfortunately for many people reading about or listening to qualified advisors a typical mantra is before you save pay off your debts and build a rainy day fund.

For many people this will take years and poor advice for the average person.

Saving a modest amount each month at an early age will reap dividends decades to come.

I don't know if younger people are any less financially literate than my generation but the low pension contributions required by the NEST scheme will make people complacent.

Opening a pension scheme at birth is the affordable option for many parents.

It only requires a small sum each month

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Ian Humphreys

Mar 25, 2017 at 09:20

Stephen B is correct. The life expectancy at birth today is less than it is if you have already reached 65. Makes sense and I got that confirmed by the NSO. By 65 you have already passed a lot of hurdles that can cause death so you are expected to live longer. Why don't the Gov't look at tapering the state pension. Full amount from 65-75 and then reduce by half (or some other amount) from 75-85 and a further reduction after that. The older you get, the less money you need so they say. The essentials are utilities and food.

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Mar 25, 2017 at 10:12

Another view from The Michael Roberts blog Public vs Private:

Yet, the government and their ‘experts’ say that public pension schemes are becoming too costly and must be reduced. The argument is that, as they are ‘unfunded’ i.e. not invested in financial markets, so the taxpayer has to make up the difference in costs after employee and employer contributions. The cost to the taxpayer is forecast by the UK government to rise from £4bn a year now to £10bn by 2016.

But the main reason for this growing deficit is not because public sector pensioners are paid too much or public sector workers contribute too little. It is because 3m employees have left the public sector since 1991 due to privatisation and cuts in services, a fall of 45%. With the coalition’s pay freeze and planned further reductions in the public sector workforce, pension contributions will fall further behind the growth in the cost of the pension payouts. Indeed 44% of the rise in the gap to 2016 is due to this. Just a 15% increase in the number of public sector workers (rather than a reduction) contributing to the schemes would close that gap.

The UK spends just 5.7% of GDP on pensions (state, public and private) compared with 7.2% in the OECD. And yet we have 27% of the UK working population aged over 65 compared to 24% in the OECD. Britain’s pensioners have the fourth-highest level of poverty in Europe, worse off even than Romanian and Polish pensioners in relative poverty terms. Nearly one in three British pensioners are ‘at risk of poverty’ compared with just 19% for the EU average.

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David Benn

Mar 25, 2017 at 10:59

One other aspect not mentioned above is that the ratio of years paying in versus years taking out has slumped due to education finishing (and therefore work starting) later and later.

School leaving age used to be 14, with only a tiny minority of students getting any formal tertiary education - contrast that with today's scenario, with degrees and doctorates deferring some students' entry into the workplace until their late twenties.....

Ms McGagh has hit the nail on the head - don't rely on the state to provide pension and end-of-life care.

PS I'm 67 and still enjoying work - and my business partner is 70.......

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Stephen B.

Mar 25, 2017 at 11:25

The financial balance between parents and children has also changed. It used to be the case that parents spent relatively little on children, just food and clothing, and when the children got jobs at ~ 15 they contributed part of their pay to the parents, and were also expected to support them in old age. The flow is now very much the other way! Many children now have a much higher standard of living than they used to even in the 80s, and that must mean less money to spend on pensioners.

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Mar 28, 2017 at 00:55

It's easy to criticise public sector pensions for being unfunded, but that was a governmental choice. Public sector employees and employers typically pay a significant % of salary as a pension contribution. And, as in the private sector, the benefits have been steadily reduced to make them "affordable".

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Barry Pearce

Mar 29, 2017 at 21:01

'Wishfull Thinking'?..I already recieve a state pension ...are the government goint to cancell it until I turn 70?...doubt it as I am 70 in June of this year...this article is just scaremongering

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