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Britain’s Pension Crisis: What should we be doing?

Are changes to state pension ideological or necessary ?

The welfare spending as a whole takes up about 35% of all government spending in 2014/15; this was 33% in 2010/11 fiscal year. From this, the state pension is the largest single item of welfare spending making up over 40 per cent of the total welfare spending.

So, in 2014/15, this is about £108b from £257b (42%).






pension 3

The National insurance we pay makes us eligible for state pension and other state benefits, but the issue is, government do not keep our monthly contribution in a pot tucked away somewhere and hand it back to us when we need it, NO. The money is spent as soon as it comes in, or actually, the money is spent way ahead before it is received. Thus, the working population of today is paying the pensioners’ bill of today, and by the time the today’s working population becomes pensioners themselves, they will rely on the working population of that time.



It is projected that one in seven people will be aged 75 or over by 2040 in Britain. It currently stands at approximately one in twelve. This is a massive change in demography which will change the landscape of British economy.

The generational benefit that we have now i.e large numbers of youth and people in work, paying NI and Tax and contributing to the economy may be lost in decades coming.

The obvious implication of this is that there will be more pensioners in absolute numbers and in higher proportion to the whole population than we have today, which means the spending on pension will go up dramatically and we will have fewer people in the working population whose tax and NI would fund it. So there is definitely a problem.



One of the ways government wants to fend off this impending crisis is to adopt part of the recommendation of Sir John Cridland review on welfare, which means that people born between 6 April 1970 and 78 will work until 68 years of age before they become eligible for the state pension.

pensioner 2.PNG

John Cridland review was completed in March 2017.


 The state pension age is currently 65 for men and between 60 and 65 for women.

These changes will predominantly apply to people in their 40s, affecting about 6 million people, a measure that is estimated to save the government about £75b, according to the Department for Work and Pension (DWP).


 “As life expectancy continues to rise and the number of people in receipt of state pension increases, we need to ensure that we have a fair and sustainable system that is reflective of modern life and protected for future generations.” Secretary of State for Work and Pensions, David Gauke,


So, we are expected to work longer and continue to contribute because we are living longer? But Healthy life expectancy (which measures time spent in good health) has remained roughly stable even with the rise in life expectancy. This means a lot of people will be working with some sort of illness at the later stages of their life to avoid poverty in retirement. This cannot be said to be a good quality of life.

It stands to reason that if an elderly person is working beyond the time their biological body can cope with, depending on how physically or mentally demanding the job is, it can have an adverse effect and further impact on their healthy life expectancy.

While, the cost of pension to the country is big as a proportion of the welfare budget and as a proportion of the entire national expenditure, the actual pay that reaches an individual pensioner is paltry.

The full payment (£122 per week approximately) is not enough to live on, and not everyone is even eligible for this full amount depending on your circumstances, you need 30 years of National Insurance contributions to be eligible for the full basic State Pension.


  • Continue to work beyond pensionable age, by which time you will not pay national insurance contribution

  • Delay or defer drawing from your state pension
  • If you do not have up to 30 years NI contribution, you can do a voluntary NI contribution


One thing in all of these, there is still a possibility that further changes to pension would be brought in. It maybe changes to qualifying age by further delaying pensionable age, or simply adopting another of Sir John Cridland recommendation; to get rid of the triple lock!

The Triple lock pointers

The basic State Pension increases every year by whichever is the highest of the following:

  • earnings – the average percentage growth in wages (in Great Britain)

  • prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)

  • 2.5%

GAPS in National Insurance contributions that can affect state pension:



Employed but not earning enough to be eligible for NI


Self-employed but profits and earning not sufficient to trigger NI payment


So the goal post as we know it today i.e. the qualifying age for pension and the protection by triple lock may and will probably shift, hence if there is still anything call state pension in 20-30 year time, it will be contemptible at best.

It can be argued that this measure of shifting pension goal post is simply ideological; it does not have to be like this. It can also be argued that government should look elsewhere to make cuts or savings and not continually attack the people that have worked hard for the system at their very vulnerable time of need.

It can even be looked at from legal standpoint, because the social contract between citizens and government come with an expectation when we are handing our NI over to the government, directly deducted in most cases without a choice. Part of the expectations is that we will be looked after when we are in need, not when the government feels like it. Thus this contract has been breached.

These are very valid arguments but the right or wrong of government approach is not the point here.


The question is, as an individual, what should we be doing to prepare for the time we will be unable to put in the hard graft or any graft at all?

It is clear now that no matter how hard or long we work and contribute to the system; it cannot be relied on to come to our aid without been used as a political bargaining tool and without being subjected to the mercy of the government of the day.

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