State pension uncertainty means young people really need to save

The state pension may not even be around when we retire

Updated: 
Saving coins

If you're in your 20s or 30s you're probably steeling yourself to work until age 70 before you get the state pension, but what if it's not there at all?

In a week where prime minister David Cameron has confirmed all pensioners, regardless of wealth, will continue to receive perks like free bus passes and winter fuel allowance, there are some people worrying about what this means for younger generations.

Spoiler: it doesn't look good.

With ageing populations, generous triple locks on the state pension and a potting shed full of perks, there isn't going to be much left for those who retire in 40 or 50 years.

Calculate your pension income options

NI fund

Pension expert Michael Johnson believes the state pension will be dead within 50 years, based on forecasts from the Office of Budget Responsibility (OBR) about the future of the national insurance (NI) fund. While many believe their NI contributions are put into the fund to pay for their own retirement, in fact the money pays for those who have already retired, and the pot is running dry.

Even the OBR says that by next year the NI fund could be bust and that's not good news. Couple a rise in the old age population with a lower tax take due to poorly paid jobs and something has to give.

For millennials, this is a very real problem. While babyboomers will take out 118% of what they paid into the system, younger people are urgently being told pay into a pension.

Auto-enrolment gives us a clue as to where we are heading – more individual responsibility and less reliance on the state. And while everyone should look after themselves, it isn't fair to think that we're being encouraged to pay for ourselves and paying for babyboomers pensions and perks too – especially if those benefits won't be available to us.

In effect we could be paying twice for half the benefit.

And that's before we're even factored in the cost of paying for long-term care for the increasing number of old people, especially as babyboomers are being allowed to access their pension as cash to spend as they like and leaving nothing for care costs.

While we are all being encourage to think of our future, the babyboomers – who aren't known as the 'luckiest generation' for nothing – are being encouraged to spend, spend, spend. And they say we're the irresponsible ones.

7 ways to improve your retirement

7 ways to improve your retirement


Read more:
State pension rising twice as fast as workers pay

Why the flat-rate state pension reform still isn't fair

Flat rate state pension: who will miss out?

Calculate your pension income options
State Pension Plan: The Winners and Losers