One in three expect less generous state pension by the time they retire
One in three UK workers fear the state pension will be less generous by the time they come to retire. This was one of the key findings in a survey by pensions and insurance firm Aegon UK.
Out of the 3,890 polled, one in 10 said that they expect there to be no state pension at all by the time they reach retirement. Only 11% expect the state pension, which in full pays £155.65 per week, to become more generous.
Kate Smith, head of pensions at Aegon, adds that a large majority of those surveyed, 70%, admit they do not trust the current government to make fair decisions when it comes to reforming the state pension in order to strike the right balance between pensioners and those of working age.
“Against a backdrop of almost continuous reform, it's perhaps not surprising that just a third of people believe the state pension will be as generous when they come to retire,” says Smith.
“This wasn't helped by the confusion surrounding the introduction of the new flat rate state pension, with many reaching retirement finding they're not entitled to the full pension of £155.65 per week.
“In an ageing society, the state pension is always going to be an expensive benefit to maintain, but it's one we hope future governments will continue to support, given that it underpins the majority of people's retirement incomes.”
Meanwhile, the days of the 'triple lock', which guarantees annual increases in the state pension, may be numbered. Under the triple lock the state pension will rise each year by at least 2.5%, or the rate of inflation or growth in earnings, whichever is highest.
Before the referendum ex-prime minister David Cameron said he would consider axing this 'special protection' because a Brexit would leave a big shortfall in public finances.
Malcolm McLean, senior consultant at pensions consultancy Barnett Waddingham, thinks it will remain in place until at least 2020.
“The triple lock is viewed as unaffordable in the long term, but I would expect it to remain in place until 2020, which the Conservative party committed to in its 2015 election manifesto,” he says.
“But in terms of the chances of the state pension being cut - Britain's economy would have [to be] bad as Greece's for politicians to consider such a move.”
Steve Webb, the former pension minister who is now policy director at Royal London, expects the triple lock to remain protected.
He says: “There is no doubt that we are entering a period of great uncertainty. More immediately for today's pensioners there may be concerns about threats to the triple lock on the state pension, but it would be odd for a government to prioritise a cut which would affect the most powerful voting bloc in the country."
This story was originally written for our sister magazine, Money Observer.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).