Britain is heading towards a demographic tipping point, with pensioners set to make up more than a quarter of the adult population by 2075, according to an official review into the state pension age.
Suzy Morrissey, the independent reviewer appointed to examine the long-term sustainability of the state pension, said the number of people of pensionable age or older would rise by 55 per cent over the next half-century, reaching 19.5 million. The number of over-85s is forecast to nearly triple, from 1.8 million today to 5.1 million.
The report highlights the fiscal strain of an ageing population. The proportion of adults above the state pension age is projected to climb from 22 per cent to 28 per cent of over-16s, while the annual cost of the state pension is expected to rise from about 5 per cent of GDP to 7.7 per cent by the early 2070s.
The state pension age, currently 66, is already set to increase to 67 between 2026 and 2028 and to 68 by 2046. Previous governments floated the idea of accelerating the timetable but pulled back amid fears of a voter backlash. Morrissey’s review will consider whether linking the pension age to life expectancy could ensure “fairness between generations” while easing the burden on the Treasury.
Sir Steve Webb, a former pensions minister and now a partner at consultancy LCP, said further rises would be politically fraught. “In the UK, changes to state pension ages have become highly politically sensitive, and this is likely to lead the new government to be cautious about further major changes,” he said. “A much more aggressive timetable for moving to 68, or a timetable for making younger workers work to 69 or 70, seems unlikely.”
One government source dismissed the prospect outright, warning that raising the pension age would amount to “electoral suicide”.
At the same time, ministers have launched a new pensions commission amid concerns that today’s workers face a greater risk of poverty in retirement than their parents. Analysis by the Department for Work and Pensions suggests that 15 million people are not saving enough, with nearly half of working-age adults putting nothing aside. The problem is particularly acute among the self-employed, the low-paid and some ethnic minority groups.
Around three million self-employed workers are saving nothing for retirement, while just a quarter of low-paid private sector staff contribute to a pension. The same proportion of Pakistani and Bangladeshi workers are saving, raising fears of widening inequalities. Women also face a significant pensions gap, with those approaching retirement expected to draw barely half the income of men.
The commission’s review comes against the backdrop of predictions that those retiring in 2050 will receive around £800 a year less than today’s pensioners, even as longevity rises.
The automatic enrolment scheme, introduced after a 2005 pensions commission, has helped lift participation rates — with 88 per cent of eligible employees now saving into a workplace pension, up from 55 per cent in 2012. But experts warn that without higher contributions and broader inclusion, Britain risks a looming retirement crisis.
For Rachel Reeves, who faces pressure to plug a hole in the public finances, the dilemma is acute. Reforms that could make the system more affordable in the long term carry high political costs today — and offer little near-term fiscal reward.
