Future of old age funding looks grey as the state pension turns 110

The state pension has saved millions from destitution over the decades but today it is expensive, controversial and failing to support us, experts warn

Just 15 per cent of those over retirement age say they could live of the state pension alone (Getty)

If you’d retired this week in 1909 you could have been the lucky recipient of 25p a week in state pension. That’s just £29.54 in today’s money.

At £164.35 a week in 2019, the benefit is worth more than five times that.

In 1909, you stopped working at 70 and were expected to live less than 10 years more. Today, it’s 65 and you’ll probably survive another 20.

Clearly, there’s no question of its worth. The government stipend makes up almost £6 in every £10 of income received by those over 65 and up to £9 in every £10 of those in the UK’s lowest income groups, according to data by Just Group.

And yet just 15 per cent of those over retirement age say they could live of the state pension alone.

“The significance of State Pension Age on most people’s lives should not be underestimated – for many it marks the point where people can finally afford to step back from work. It provides the financial bedrock for later life,” said Stephen Lowe, director at Just Group.

But that step back will be later than almost 3 million people expect it to be, according to research by YouGov for Age UK.

Last month, as male and female retirement ages were unified at age 65, and with the age set to rise to 66 within two years, the charity warned that one in four people already aged between 50 and 64 don’t know what their State Pension Age (SPA) is.

A third had never checked or couldn’t remember and one in 10 who thought they knew got it wrong.

While thankfully most people will live to 67 and beyond, there are many – particularly men in more deprived areas and those on low incomes – who are unlikely to make it to their SPA in good health.

Data from the Office for National Statistics shows that in the most deprived 10 per cent of areas of England, healthy life expectancy at birth is just 51.9 years for men and 51.8 years for women – nearly 15 years below the current SPA.

Of those who told YouGov they don’t expect to be working in the two years leading up to SPA, more than a third cited poor health or caring responsibilities as the main reasons.

“Clearly there is still much confusion about the age at which people can expect to receive their state pension and our worry is that many who have few resources to fall back on are in for a nasty shock,” says Caroline Abrahams, Age UK’s charity director.

“We think the most pressing and immediate concern is the hundreds of thousands of people in their 50s and 60s who are unable to carry on working today, and who are really struggling financially as a result.

“The government needs to do much more to help people in this position now. More support should be given to those who are badly affected by increases in SPA, like men and women earning low wages who are completely or mainly reliant on the State Pension to get by in retirement. We urge the government to allow early access to the state pension for those who effectively have had no choice but to stop working before they reach their SPA.”

When we do get to SPA, life expectancy changes mean we’ll now be paid for more than twice as long as we would have been when the scheme was introduced 110 years ago.

“Future life expectancy improvements are very hard to predict and there’s been some debate recently about whether or not they’re slowing down,” says Steven Cameron, pensions director at Aegon.

“What’s clear however is that the state pension is a relatively expensive component of government spending accounting for around 40 per cent of all welfare costs.

“Even with scheduled state pension age increases, this could rise as our population ages. It’s hard enough predicting trends 10 years into the future, let alone picturing life in 110 years’ time. But as we benefit from an increasingly long and hopefully healthy retirement, it makes sense not to be totally reliant on the state pension for your retirement income.”

Anyone who is concerned about their retirement income and/ or SPA can call Age UK Advice free of charge on 0800 169 6565, visit www.ageuk.org.uk or contact their local Age UK for further information.