State pension payments are the bedrock of retirement income for many individuals, and so getting probably the most out of them is more likely to be key. Nevertheless, a latest report has sparked concerns amongst experts in regards to the way forward for the state pension in its current form.
The Government Actuary report pertains to National Insurance contributions made by Britons.
It showed recent changes to NI contributions and the state pension mean outgoings will exceed receipts in every year from 2024/25 till 2027/28.
That is more likely to spark a debate on the sustainability of the state pension in its current form.
Steven Cameron, pensions director at Aegon, said: “The state pensions being paid today are funded from the National Insurance contributions of today’s employees on a ‘pay as you go’ basis.
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“Last 12 months, the Government significantly increased the earnings threshold above which National Insurance contributions are paid.
“This was excellent news for take-home pay, however it meant the Government will receive less from National Insurance receipts than it could have, each this 12 months and in future.
“However, under the ‘triple lock’, the state pension might be increased by a record 10.1 percent in April which can cost the Government significantly more, again each next 12 months and in future years.”
The report from the Government Actuary has shown expenditure as being higher than receipts until the 2027/28 12 months.
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It’s price noting the figures don’t look beyond this point.
Nevertheless, Mr Cameron warned unless changes are made to the system the state pension is becoming “increasingly unaffordable”.
He continued: “While there may be a really small fund to cover the shortfalls till 2028, it’s declining rapidly and will run out entirely unless the Treasury steps in and pays special grants.
“The Government did honour the state pension triple lock this 12 months.
“But there may be growing concern that granting such generous upratings in future years will simply be unaffordable, without putting growing pressures on today’s already stretched employees.”
READ MORE: State pension triple lock increase means ‘higher 12 months’ for older Brits
In his Autumn Statement, the Chancellor Jeremy Hunt touched upon the triple lock increase, explaining why it could be making a return in April 2023.
He said: “The associated fee of living crisis is harming not only poor pensioners but all pensioners.
“So because we’ve got taken difficult decisions elsewhere on this statement, I can announce that we are going to fulfil our pledge to the country to guard the pensions triple lock.”
Mr Hunt explained the ten.1 percent increase according to September’s CPI inflation figure means the typical state pension will increase by £870 – the largest ever money rise for the state pension.
A pending decision can be due on the state pension age, because the review continues, with Mr Hunt stating feedback might be expected in “early 2023”.
Based on Mr Cameron that is more likely to have a big part to play within the affordability of the state pension going forward.
He added: “The Government will shortly publish findings of its review into state pension age.
“There’s a robust likelihood that on affordability grounds, this can have to extend beyond age 67, sooner than currently planned. These latest Government Actuary figures make changes to state pensions much more likely.”
A Government spokesperson recently told Express.co.uk a choice was yet to be made on the state pension age.
The DWP spokesperson added: ““The Government is required by law to commonly review the state pension age and the second state pension age review is currently considering, based on a big selection of evidence including latest life expectancy data and two independent reports, whether the principles around state pension age remain appropriate.
“The review might be published in early 2023.”