New research from PwC predicts that someone born today will not receive their state pension until they are 77 and their children will work until they are 84.
This means life expectancy for those people will be 97 and 104 respectively. If the research is correct it shows how the changing demographics of the UK will have such a vital impact on pensions in the future.
The prediction indicates that the state will still expect to have to provide a state pension for an average of 20 years.
But the ratio of people still working to support pensioners has changed dramatically from 100 years ago, when living to 65 was rare.
The analysis conducted by PwC is based on future life expectancies. The Office for National Statistics (ONS) says that one-third of babies born in 2012 will live to 100.
In the Queen’s Speech last week setting out the government’s legislative programme for the next 12 months, plans were presented to link the state pension age to life expectancy. This is in addition to new rules that will see the state pension age raised to 67 by 2028.
PwC expects the state pension age to rise to 68 very soon afterwards, by 2031. The research indicates that people in their late 30’s now will not receive a state pension until they are 70.
Raj Mody, head of pensions at PwC, said: "Many people born today face working from 17 to 77. Most people will want to stop working sooner but may not be able to afford to bridge the gap to the start of their state pension."
When the state pension was first introduced in 1908, there were more than ten workers supporting every pensioner aged 65 and over. That is in excess of ten workers paying tax and national insurance to help fund a shorter period of retirement for one person.
According to PwC’s research, the amount of workers paying for one person to receive the state pension had dropped to 3.6 by 1970 and is now at 3.2 people per retired person.
PwC believes this will drop further to 2.9 by 2050, indicating that a much higher proportion of people will be enjoying some sort of retirement compared to active workers in the UK economy.
Of course, it may prove that to continue to enjoy a reasonable standard of living, many recipients of the state pension will need additional income. With the proportion of employees who pay into a company pension scheme declining and annuity rates falling, many employees may have to continue to work part-time even as they receive their state pension at a later date.
Jon Andrews, head of the HR practice at PwC, added: "The gradually rising state pension age raises big questions for employers. For instance, what impact will the aging workforce have on opportunities for younger employees? What changes do they need to make now to the benefits they offer their employees? This isn't some futuristic scenario - the state pension age is increasing steadily and firms need to start planning and adapting now."
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