State Pension – 110 this week – and an increasing expense for government
3 January 2019
The state pension is worth 5.5 terms more in real terms and people are living over a decade longer than when it was launched in 1909. This makes it expensive for governments, says Steven Cameron, Pensions Director at Aegon.
As we enter 2019, the state pension celebrates another milestone with the first payments made 110 years ago.
In 1909, it was worth £29.54 a week in today’s money terms compared to £164.35 today, showing the increased role the state has played in supporting pensioners.
In 1909, when the State Pension was paid from aged 70, a woman of this age was expected to live on average an additional 9.3 years, and a man 8.4 years* meaning they’d receive around 9 years of state pension.
The current state pension age for men and women is 65, increasing to age 66 over the next 2 years. But those reaching that age now are expected to live for approximately 20 more years, meaning the state pension is typically paid for more than twice as long as when it was first introduced.
Future life expectancy improvements are very hard to predict and there’s been some debate recently about whether or not they’re slowing down.
What’s clear however is that the state pension is a relatively expensive component of government spending accounting for around 40% of all welfare costs** and 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 retirement income.
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