Who’s going to pay our pensions in 20-30years if the UK keeps its birth rate low and also restricts immigration?

[AlertEagle]

posted from another forum
Serious question. The UK’s birth rate is well below replacement level, meaning fewer young people entering the workforce. At the same time, the political mood seems pretty anti-immigration, even though immigration is one of the only things that’s kept the tax base stable.

State pensions are paid by current workers’ National Insurance contributions, not some magic fund. So… what happens when there’s a huge retired population and not enough working-age people to support them?

Will the government raise taxes, increase the retirement age, cut pensions, or eventually U-turn on immigration just to prop things up?

Feels like a ticking time bomb no one’s really addressing. Curious what others think, is anyone actually planning for this?

Or are we as a nation willing to give up state pensions if it means less immigration?

This is the entire point of a private pension... gotta look after yourself.

Compound interest. If you are saving over 40-45 years, it adds up over time. £250 per month over 40 years is £600k, assuming 4% interest. Most people could manage £250 per month from their pre-tax income.

Sorry, yes it was sarcasm!

Maybe a few years ago, yes. Now many people especially the young are living and to mouth due to student loans, rents and col rises amid wage stagnation.

Unfortunately it is something you need to prioritise. £250 pre-tax is more like £150 post tax. Somebody on £40k per year or so should be able to find that in the budget, even if it means a smaller house budget, a cheaper holiday, etc.

I agree somebody on NMW couldn’t, but they will likely be better off on pension credit anyway. I’m talking about professionals on £40-80k who say they won’t be able to manage on state pension.

The thing is I started work 30 years ago, and actually my first full time salary was 8.5k! So I couldn't have saved £250 a month. My rent was £300. I then earned 12k, 16k and 18k before hitting about 22k and then wages started to stagnate generally. Housing in particular was cheaper but it wasnt free.

I understand a professional on 40k might be able to save 250 a month now, but I was thinking that with inflation that might look very small in 40 years time. I do understand compound interest but i don't get inflation and taxes impact on what happens.

But what do people do who are 40/50 years old NOW who didn’t start at 20? I was on 3.25 an hour when I was 18. I couldn’t save £250 a month! And in my 30s as self employed I unfortunately didn’t get any pay for when my parents died and I needed time off. Or needed time off for my many IVF rounds or the time off for surgery for my many miscarriages. All my spare cash went on that. So no I didn’t save much for a few years then either.
And now I don’t have 40 years to save 600k. And I’ll likely be disabled out of my job within 10 more years. So what am I meant to do if they take away the state pension? Yes I’ll happily sell my house and that can fund for a bit. But after that? Then what?

Compound interest. If you are saving over 40-45 years, it adds up over time. £250 per month over 40 years is £600k, assuming 4% interest. Most people could manage £250 per month from their pre-tax income.

You think most people can spare £250 a month? 😆

£250 pre-tax is more like £150 post tax.

And how can you make sure it's pre tax?

I’m talking about professionals on £40-80k who say they won’t be able to manage on state pension

Someone on 80k will likely be paying £250 a month into their company's pension if you include employer contributions. This does not necessarily mean they will end up with a 600k pot though..

And the majority can't do that at 20...

It’s the elephant in the room isn’t it. What jobs will people be doing at 65 plus? Yes there are people who can work way past this age but not everyone will be able to reach the performance levels expected.
Also many people would need shorter working hours/week and maybe even an increase in annual leave. As heath conditions start to crop up that can affect energy levels etc and people might need more recovery time.

...and really, if you are saving over a decades-long time frame your pension fund shouldn't be anywhere near cash earning a paltry 4% p.a. Ideally you'll be in some sort of equity tracker with rock-bottom fees returning closer to 10% p.a. (which is the long run average return of world equity trackers). With that sort of compounding then fairly small regular contributions starting early in your career can grow to a very decent pot. And auto-enrolment very sensibly started a lot of people off down this path (or at least a path more sensible than ignoring pensions until you're 45, then saving a load in cash).

One of the problems, though, is that so many people seem to have a mortal fear of investing in the stock market, even if on a passive basis. Witness the mooted changes to cash ISA allowances - if that did nudge more people to put more of their long-term savings into equities then a lot of people would benefit in the long run, but the response to those sensible proposals was people screaming blue murder at Rachel Reeves for taking away their right to earn shite returns on £20k every year.

So I do think that inching up auto-enrolment is a key part of the long-term solution, ideally combined with getting people better educated about investing generally.

Has anyone mentioned equity release yet?
People who are asset/property rich should be able to release equity by way of an annuity, if they are struggling or have little pension, stay in their house, and live happily ever after.
Once departed, the equity release company recover their costs from the sale of the property.

There is no way the state should be subsidizing people with a £500k house because they want to leave it to their kids.

Plus employers need to take the 65 plus not the younger candidate.

Full time working people with no children on minimum wage do not get any Universal credit.
With 35hours/week they would be be earning too much.

There’s a mentality I see all the time with regard to pension crefits/state funded care etc. Resentment that ‘I worked hard for 40 yrs but Mrs Notalot was SAHM/ unemployed & she gets pension credit. It’s not fair ‘ It actually stops some people providing for themselves. Less reliance on the state & worrying about what others might get would help the country. I’m making sure my YA DC start a pension as soon as they are earning!

Neither is taking away a state pension that people have been led to believe they are entitled to by paying 40 years plus of national insurance. Smaller more densely populated housing? Euthanasia?
Just change the immigration policy to net taxpayers only and the problem will go away after 20 years,

I think more people will work part time past 65 in future. If you are lucky enough to have property with a mortgage paid off, your costs are down. A 3 day a week job at minimum wage would currently earn you just over £1k per month to top up a low private pension to a much more comfortable level. I fully expect to need to do this, assuming I live long enough and am not too disabled. I have been contributing to a pension since I was 25, but it is a defined contribution one, so not nearly as generous as times gone by. We simply have to do the best we can with what we have.

The same could be said though of anyone working if they had equity in property and applied for Universal credit
If that equity is taken into account most wouldnt get UC ( given the deposits required to buy they’d already be over the allowance )

Agree @duvetsmuvet
im amazed by this sweeping comment too.
It’s no wonder once people sit down with a calculator they decide they can’t afford kids if the expectation for a reasonable retirement is this sum every month.
Its simply out of reach for most people

Immigration doesn’t solve the problem, as eventually those immigrants become pensioners themselves, so we would have to bring in more immigrants, and on and on, it’s not sustainable. That’s also presuming that all of the immigrants are economic contributors and none of them are stay at home parents, disabled, unemployed etc.

They'll have people work longer past current retiment ages - think there is legistalation that can push it with no extra votes to 70 currently - some will keep there jobs if they have needed skills - other will have to do lower probably p/t time work in retail/cleaning and care -( the hard graft low paid stuff) and others will get disablity top up payments.

So think it will be a mix of some state pension, some inheritace from mostly housing though image taxing that more will also come - some p/t work for longer as happens in USA - and a reduction in living standards for retired people. There may be some more extended family living happening - but given culture in UK and house size may not happen.

I also think we'll continue to import workers - as that most of the projected population increase - and that does impact on birth rate as it increases competion for scare resouces like housing.

I think the state will continue to decline with ever increasing push to put more risk on individuals with private pensions, medical care costs, and elder care whil increaisng the tax burden and then wonder why the working population is stress in poor health and very unhappy.

If MN posters held sway it would be euthaise people soon as they stop working and start needing signiifcant health care - but it won't affect current pensioners that will affect next couple of generations ie most posters on here.

I do think some people worry about the security of pensions too! In the past there have been companies who have misappropriated pension funds or collapsed with no money to pay pensions etc though obv we now the PPA to protect us.
But if your private pension is invested in the stock market what happens if there is a crash/ Liz Truss situation neat the time you plan to retire? Would you lose a lot of your pension? I genuinely don’t know! I’m in the NHS pension so not directly affected. The average working class Brit is not particularly financially literate. Many probably worry about losing the small amount of savings they might have scrimped to save over the years.

@Meadowfinch lets not also forget people these days ( unlike yours and mine) have to pay back student loans.
That bites into a take home salary and impacts on pension payments