Is the UK state pension pot about to run dry?

According to a Centre for Policy Studies think-tank there is a real possibility that reserves which fund the state pension could run out as “early as next year”.

While the initial report may sound alarming, the report suggests that future state pension amounts will end up being “derisory”, something which Michael Johnson, an academic at the CPS, believes will lead to the state pension being “watered down to a basic subsistence”.

Fears are already abound that people currently under 45 will have to wait longer to receive their state pension, and are likely to see increases in taxes to fund what will be an aging society when they reach 65.

Mr Johnson told the Daily Telegraph that “‘It doesn’t matter which government is elected next year, the state pension age will have to go up much faster and sooner than anyone expects to cover the funding deficit.”

It is currently estimated by some sources that the age of retirement is expected to increase by as much as six months every year, and some reports even suggest that state pension may be unable to support a population which is increasing life expectancy at rates which current funding cannot support.

Mr Johnson suggests that if the funds were to be depleted, income tax may be required to fund the payments, and goes as far to say that income tax should be merged with national insurance to simplify the situation.

For the generations under 35, there’s a clear message: Unless you begin planning now, don’t expect to be retiring on a state pension.