I have returned to this issue, discussed here not long ago, as the YouTube audience differs to that here:
Will you still get a UK state pension when you retire? With means testing, cuts and even abolition on the table, many are worried — and rightly so. In this video, I break down the risks, what recent surveys show, and how it could damage the whole economy if the pension system collapses.
This is the audio version:
This is the transcript:
Will you get a UK state pension when you retire? It's a question that I first asked myself when I guess I was in my forties, because that's when most people begin to think about retiring, at least sort of seriously. Until then, it's just a fantasy so far in the distance that you can't think about it, but when you're in your forties, it's only 20-odd years away, and you begin to ask the question.
Well, I did get a state pension. I've got it now. I'm 67 and I got my state pension at the age of 66. Most people will now get it at the age of 67, but what about the generations to come?
The UK state pension is already one of the meanest in Europe. In proportion to average earnings, it's tiny at around 40%. Most European countries pay a far more generous pension than that, and our UK politicians still see pensions, despite that fact, as a place to cut costs.
Now we know already that Labour is willing to punish those on low incomes. Just look at how they have tried to treat people with disabilities. I know they've lost most of that bill, but the fact is, there is a mean streak running through our political system and not just amongst the Tories. A cut in pensions is possible, or at least they could be frozen, and either way, the state pension is not guaranteed in the future.
I noticed this question because Hargreaves Landsdown, the financial advisors who do, of course, have a stake in selling private pensions and do therefore have an interest in this issue, had done a survey of people and asked the question, did they think that there would be a state pension in the future?
17% of the people they surveyed thought there would not just be a state pension in the future, but there would also be something called the triple lock, which basically guarantees that it goes up by 2.5% over the rate of inflation. That's great for existing pensioners. I know, because as I say, I get that pension.
But 22% think that the state pension will exist without the triple lock, and I've got to say, given that pensioners have overall recovered some of the ground that they had lost by the time that the triple lock was introduced nearly 15 years ago, I think now, it would be unsurprising if that lock was now dropped.
What is more interesting is that 15% of people think that the state pension will be maintained, but will be means-tested, meaning that only those who have below a certain level of other income will now get it.
And 46% think that the state pension might be abolished altogether, or are at least unsure whether it will survive, meaning that they will be forced to rely on their own pension provision, which is kind of scary when some groups in society make very little pension provision at all. For example, 80% of the self-employed have no pension provision whatsoever.
Because this piqued my interest, I ran two surveys. One was on my Funding the Future Blog, and I asked slightly different questions on X. The only reason why I had to do different questions was that I could ask six questions on Funding the Future and only four on Twitter, and Twitter restricts the number of characters I could use, so I got slightly different expressions of concern from both. But in summary, the outcome was broadly similar and on X, over 2000 people voted.
24% of people thought that the state pension would continue unchanged. I didn't ask about the triple lock in this case.
34% thought it would become means-tested, which is much higher than was the case with regard to the Hargreaves Lansdown survey.
25% thought it would be abolished, and 17% thought it would continue to exist in name only, in effect, because it would be privatised.
In other words, the schemes that people are now forced to pay into when they're at work will replace the state pension, which, if you add those last two numbers together, by the way, does imply that at least 42% think that, in effect, the state pension will disappear.
There is therefore a remarkable lack of confidence in the future of state pensions, and this is really quite scary as far as I'm concerned.
Most UK state pensioners live in low-income households. As a matter of fact, we know that is true because, as I've already noted, most people have very limited private pension provision, and as a consequence, frankly, most pensioners are living on the breadline.
That means that every single penny they get by way of benefit, whether it is the state pension or pension credit, or anything else, is spent, and that spending inevitably supports jobs and businesses in the rest of the economy, because they are the recipients of that spending. And once that money is received by those people who are working, tax is paid, whether it be VAT, income tax, national insurance, or corporation tax, maybe even business rates. And as a consequence, the vast majority of the money that is paid by the state to pensioners does eventually go back to the treasury by way of tax.
If we cut the state pension, which is what most people expect is going to happen, we would, in fact, simply cut the capacity of pensioners to spend, and as a result, the immediate and straightforward consequence would be that we would reduce spending power within the economy as a whole.
Cutting pensions would therefore have an immediate and harmful impact on businesses, and it would increase unemployment. In fact, the likely saving in cost might be negative because the overall lower tax take and higher welfare costs that would result would in fact outweigh the saving in pension payments made.
So, what do you think?
Do you think the state pension is going to survive?
I've put the poll that I put on Twitter on our community page at the moment. You can find it as a post, and there you can vote, offering your opinion on the four options that I presented earlier in this video.
You can decide will the state pension remain, will it be means-tested, will it be privatised, or will it be abolished?
And please also let us know in the comments below. We do notice these even if we don't respond to them all, because there are simply so many.
And you can also take action. As I say, time and again on this channel, democracy is not a spectator sport. It is a participatory sport. You can write to your MP about the future of the state pension. There's a link below this video to a transcript of what I've had to say here, and from that transcript, you can also copy and paste the text of what I've had to say into Chat GPT using the prompt that is also linked below this video, and that will produce a letter to your MP for you to send, if you so wish. You will have to find out their email address, but that's the most that I'm asking you to do. Of course, do check that the email that you are sending does make sense to you.
But my point is this: if you are worried about the future of the state pension and if you haven't got yours yet, and maybe even if you have got yours, then speak out because the simple fact is, your voice matters.
Taking further action
If you want to write a letter to your MP on the issues raised in this blog post, there is a ChatGPT prompt to assist you in doing so, with full instructions, here.
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Typo penultimate para – check that the letter to your MP “DOES” make sense (even if their reply doesn’t!).
Corrected. Thanks
As a start, pensioners should be taxed at the same rate as workers; I would raise income tax rates and abolish NI.
To do this suddenly would create real problems…. but do it over 10 years bit by bit.
This would be far better than means testing and ensure wealthier older people contribute properly.
I agree with merging income tax and NI.
But as a first step, and I’ve talked about this before, I would charge NI on all earned income for people above pension age. Starting next April.
(I’d love to have an idea of how much that would raise, Richard, if the figure is accessible from current statistics).
It is completely bonkers that my employer pays NI on my earnings but I don’t.
(It is also very annoying that, although they could include me, the insurance company that runs the company pension fund has excluded me since I reached 75. Apparently to do with a perceived risk that they want to avoid. )
I agree with you.
I choose to still work. Why don’t I now pay NIC?
There is no HMRC estimate of the cost I can see and I don’t think the data exists to easily estimate it.
https://www.gov.uk/government/statistics/direct-effects-of-illustrative-tax-changes/direct-effects-of-illustrative-tax-changes-bulletin-january-2025
Pensioners are taxed the same as other taxpayers – exactly the same personal allowance and all pensions paid, including the State Pension, count towards taxable income. Plus they pay VAT, Council Tax etc. Just like all adult earners.
Pensioners stop paying NI when they reach official retirement age by which time the majority of pensioners will have paid more than 40 years of NI e.g. 26 to 66 years of work is 40 years of NI – you don’t stop paying which you reach 35 years of NI contributions. The basic rate of NI is 8 % earnings but on earnings over £50 thousand only 2% is taken.
If its abolished either
1. You need to be able to get an extra £12K a year in a private pension to replace it, or
2. You rely on means tested benefits
I suggest for most Option 2 looks like the most sensible with all the costs that entails
Have you looked at Australia which abolished the State Pension many years ago?
No, I haven’t
The experience has been?
Universal Credit is less than half the State Pension and does not have increases anything like the State Pension, so if you did this our general benefits would need to rise considerably. Whilst our current UC rates should be much more than they are, given the outrage over the removal of the winter fuel allowance I have no idea how anything like this could be introduced.
Reply to John Boxall
Your comment regarding means tested benefits makes sense …but ONLY if these can be reasonably guaranteed over the long term, no matter what party is in power. We have seen how these can be suddenly reduced, abolished, or made difficult to apply for and receive.
Nope. I don’t want to have to rely on state benefits, unless they are enshrined in law and above short-term political manipulation. And easy to access, with dignity, if they are needed. If they aren’t, how can anybody plan for their retirement?
Don’t forget what happened to WASPI women. If political parties are allowed to move goalposts at will, regarding retirement age and benefits, state ‘benefits’ and pensions mean nothing, really. Everything you might have contributed to and relied upon during your working life ends up meaning nothing.
This reminds me of the backwards thinking you’ve noted before, that when states try to “save money” or “cut costs”, this simply creates an externality. Macroeconomically, the (cruel) politics (and power) become clear: “affordability” is a misdirection, it hides the reality which is a disregard, and absence of care. And, as you note, removing the state pension won’t reduce people’s need overall for money, they will just, somehow, have to try and get it from a different source (which won’t happen), hence cafés, bars, restaurants, cinemas, shops, service providers and so on will notice their incomes falling. Why people can’t see that reducing government spending directly reduces the size of the economy is beyond me. On the one hand people think if money as circular (tax and spend), but on the other, they think that the spend disappears into a black hole.
We have the worst of both worlds. A mean, inadequate, disappearing State pension and bloated, inefficient private pension providers. Are there other countries with better arrangements that we could point our politicians towards? Denmark? The Netherlands?
Both
There is an argument that able bodied and mindedn people should not get state funding to just stop working at a certain age. People are spending a lot more of their life in retirement than was perhaps envisaged when the state pension was introduced.
But we also have a ‘contract’ with the state, we are told we need to save NI contributions to qualify for a pension, so any withdrawal of this would be difficult. Even if it is a fiction it’s a fiction the government has used for generations to keep people working.
I think the more fundamental problems beyond just retirement is that many governments, and unfortunately voters, tink that it’s acceptable for a society to have both extreme wealth and extreme poverty. Until this perception changes all sorts of social safety nets are at risk.
With more and more jobs disappearing through AI and other fms of auomation isnt it time to really think about the future and how society could actually work. Surely there will come a time when a system of UBI comes in and that could pave the way for the state pension to disappear.
I will be doing more of that.
propaganda manufacturing consent for its abolition?
I was a single parent (unmarried mother!) until my child was 13. Now happily married. But although I worked as much as I could reasonably do, I couldn’t ever afford a private pension. My husband has a teacher’s pension so together we manage pretty well. But I only have a little bit more than the state pension in my own right and now pay a bit of tax.
In my experience most of my friends – we’re all in our 70’s now, spend a good deal into the economy- garden plants, travel, a bit of eating out, fitness classes, spectacles etc. Life would be grim without the pension and it’s very reassuring to know it comes into the bank account without having to beg the benefit system for the help. We all have to bear in mind we might need care so are generally trying to keep hold of a bit of money for what might happen to us.
If the state takes away that reassurance and that certainty, life as an older person would be even more difficult than decreasing health and mobility is for many. As the state pension is taxable so the government gets a proportion of it back from wealthier pensioners – so it would be a lose – lose situation.
Thanks
”There is therefore a remarkable lack of confidence in the future of state pensions”
This just demonstrates the degree to which the UK public have come to expect nothing but pain from their governments. We have little confidence in the ability or willingness of governments of any persuasion to look after them. Governments actually exist to make life worse rather than better for ordinary people. We expect things to be bad and just get worse. We have fear rather than hope for the future. That is the legacy of neoliberalism.
The majority of state pensioners would go straight on the ‘breadline’ if they stopped the state pension. How would this be resolved? I guess a massive burden on the state by increasing state benefits to cover the shortfalls.
Realistically, the abolition of the State Pension will happen, but its timing must coincide with the full maturation of the auto-enrolment Pensions (say 40 years). This would mean anyone under 30 would be affected.
It could be tapered for those 30-50 (for example) to minimise the impact.
Whilst this would create a very different distribution, based on median earnings, allowing for 2.5% rise each year and an 8% contribution (combined employer/employee), this would result in a median pension pot of £370k after 40 years contributions, £500k after 45 years in nominal terms.
This assumes a modest 5% average annualised growth rate.
The real fear is for those of us 40+ who won’t have 40-45 years for those auto-enrolments to mature, hence the tapering idea.
The need for some sort of safety net is then greatly reduced to only those with very low lifetime earnings, those not part of the scheme (it needs to become mandatory really).
There needs to be some form of restriction on its drawdown or annuity purchase.
But in principle, it would work and was most likely introduced to do just that…it just needs some phasing work to allow for more immediate reductions in government liabilities…and would be completely eradicate the need for means-testing and allow for additional private pensions.
Hang on….
The existing pension is out of tax
In effect you are saying pensions will be paid of compulsory new contributions – a tax in other words, without a doubt
That is not a replacement then
Where and how and why does that fir into your thinking and justification?
Because it is currently being paid by Employers & Employees, not the Government and is a proper self-owned, self-funded, self-invested (within reason) pension.
There would obviously need to be some mechanism for top-up for low earners and the unemployed.
3%, I will grant you, is a taxi on employees, but that is far less than the 8% in NI (which nowhere near covers Pensions liabilities) and is compoundable at a growth rate likely to far exceed even the triple-lock (although that will for sure be abandoned).
It also gives people direct agency in their pension future.
It stops being a state pension and becomes and individuals pension. Assuming a long-run unemployment rate of 4-5%, it then only requires a much reduced government tax and expenditure on a smaller group (effectively a means tested income floor).
I suggested this is the most likely long-run alternative…with sufficient changes to make it universal, but one in which you as an individual directly benefit from your contribution, but the collective growth of the country also benefits everyone contributing.
If your aim is to abolish all forms of taxation, then you implicitly support the complete breakdown of the country into a survival of the fittest.
What is your preferred alternative?
I oublish this, although it is incoherent and neoliberal nonsense abut individual responsibility when as my arguments on the fundamental pension contract show, the pension equation is in fact always collective.
And how anyone thinks I want to abolish tax is beyond me.
The faith that growth of 4 – 5% on a finite planet is also profoundly worrying.
All I can say is that a great deal of nonsense is said in thos world, and soemtimes it turns up here.
Richard,
How else do we shift the burden of pension liabilities from an inter-generational one, one which is at the whim of government change, to one in which you have a direct influence on?
Paying NI today as a qualifying stamp for something you cannot guarantee you will get is a terrible idea that should’ve been changed 40-50 years ago. A giant ponzi-scheme that will inevitably fail.
You accept that it is also meagre by European standards.
You wanted alternatives. I am merely trying to provide one that addresses these problems, none of which featured in your polls as the most likely future.
I, somewhat, agree that infinite growth is a folly in the long-run and that if technology was to advance to properly that growth up, then the most likely outcome is that technological advancement would likely make money redundant in the end.
This would just be a stepping stone for the next 50-100 years. An alternative in which, a system guarantees a reasonable pension for the qualifying contributions because it is owned by the individual. It removes the 2 major problems of “I paid in, where has that money gone” or “Why should I pay for others when I’ve provided for myself”. Whilst everyone typically wants to work harder and earn more for a better life, that currently has no bearing on your future state pension. This alternative would.
I would also try to redress the hoovering up of purely rent extracting assets by the wealthy by taxing those assets more heavily.
I take no issue with investment for profit through advancement, but we must address the concentration of assets in the hands of a wealthy minority that does nothing but extract rent (land & property).
The world is not perfect, but the role of government is to ensure that until it is, that the tyranny of wealth is minimised.
We need something that benefits the vast majority, but is also acceptable inter-generationally.
It is not perfect, it is better.
The answer, if you read what I said, can only come from state intervention.
This is a macro, and not a micro issue.
You fundamentally misunderstand it.
That makes you the problem.
Of course I a seeking intergenerational faurness, but that can only come from macro solutions. You are looking in the wrong place. A personal solution cannot work.
Hi Richard i am supposed get my pension in 5 yrs from now but with the state of this countries finances and it goes bankrupt will I still receive my pension …..regards
This country cannot go banmkrupt
Hi Richard, I see that right wing headbanger came up with their favourite description of the State Pension as a Ponzi scheme. This should be slapped down every time it appears. As every free market idiot (or is that a tautology?) should know, and as many of the put into practice, a Ponzi scheme is deliberately set up to defraud. There is no fraud involved in the SP scheme. It is, as you have pointed out on several blogs, part of a mutually beneficial transfer between generations. One generation pays for infrastructure and so on that benefit future generations, and they in return fund pensions for those no longer in the labour force, and on it goes.
That’s not to say that all is hunky dory with the current arrangements. The basic pension leaves too many in a precarious situation. Pension credit , as witnessed by the WFP debacle is both a blunt instrument and a sledgehammer, as its payment results in a dramatic skewing in favour of those who do qualify over those who don’t.
In addition those in higher tax brackets pay less in NI contributions, but they will constitute a high proportion of those pensioners who live longer and therefore are a greater drain on public finances, even if it is only that their state pension continues to be paid and updated for longer.
There is a good argument to be made for pensioners, like me, whose income puts them in a comfortable position, to be subject to NI, for instance at the 2% rate. This shouldn’t be difficult or costly to implement and would, if nothing else represent a contribution to the health/social care costs that old age brings.
I am not convinced by NI on pensions.
I am by full NI on all earnings, including when of retirement age.
Kindly elaborate on what significant infrastructure your generation has paid for in the last 40-50 years?
That may have been true of the generation before you.
The problem is, you assume I’m a ‘right wing headbanger’ and you believe you’re a socialist. When the reality is, you believe the problem can be solved with a socialist solution long after that horse has bolted and I am looking to solutions that could actually work now we’re left with no horses.
The State no longer has any wealth. The State no longer has any assets. The State no longer has any means to change that.
Perhaps if your generation (whether you agreed with it or not) had not overseen the largest sell-off in national assets for a quick buck and rampant inflation in house prices to follow, without building anything of any merit, younger generations may be more willing to engage in a socially-led State solution.
The fact is, without a huge technological leap, the pot is bare.
We can start with a modest, yet significant, Land Value Tax as I proposed, alongside a workable Contribution-led Pension scheme…and let’s go from there.
1) I have made clear my generation has under invested
2) You are very clearly an economic libertarian
3) I am not a socialist. You either do nit understand the term, or me. I am a mixed market social democrat.
4) The idea that the state has no assets nor the capacity to create them is so absurd you reveal yourself to be a dogmatist, and probably incapable of reasoned analysis as a result.
I conclude, you are wasting my time with nonsense.