The UK’s pension system is in big trouble
The Department for Work and Pensions has published its latest statistics, showing another big jump in claimants.
The figures also quietly underscore the growing challenge of sustaining the state pension over the long term with an increasingly large elderly population.
The number of people receiving it has risen to 13.1 million, up more than 200,000 in a year, and the average payment has seen some of the largest cash increases on record, rising by nearly £19 a week in 2023 and then £17 a week from 2024.
This is a direct result of the triple lock and recent high inflation and strong earnings growth, which is welcome for today’s retirees but adds to the pressure on future public spending, says Jon Greer (Head of Retirement Policy at Quilter).
“The triple lock offers valuable protection for pensioners, but it has no clear benchmark and is becoming increasingly difficult to fund sustainably as a result of both the mechanism itself and the UK’s shifting demographics,” said Greer.
“A sensible way forward would be to tie state pension increases to a rolling average of earnings growth, allowing flexibility during periods of high inflation while maintaining fairness between pensioners and the working-age population.”
Greer noted that the data also shows a small but notable increase in pension credit recipients over the past year.
“While the government’s flip-flopping on winter fuel payment eligibility was unhelpful, first limiting it for winter 2024/25 to those receiving pension credit or certain means-tested benefits before reversing course and reinstating it for almost all state pensioners with incomes under £35,000 for winter 2025/26, one of the unintended consequences has been to shine a spotlight on pension credit,” said Greer.
This renewed attention has prompted some people who may not have realised they were eligible to claim what can be a reasonably generous benefit and unlock access to additional help.
“With the state pension age set to rise again and benefit policy in flux, people should take stock early of how they will supplement the state pension in later life,” said Greer.
“For many, that will mean building up private savings and making use of guidance and advice to ensure they have a sustainable retirement income, regardless of how future governments choose to manage these costs.”
