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?

I’m already in permanent pain due to my job. I can still work currently though but it’s only going to get worse. If I need to quit my job at 50 would I be entitled to a pension? Or would I need to get another job?

I would actually support a variable State pension age - say 45 to 50 years after someone starts full-time work. That would mean someone in a manual job who started their apprenticeship at 16 could get a State pension at 61 to 66, and someone who went to university and didn’t start work until 25 would get it at 70 - 75.

I did neither. I did office work from 17 and paid for my own professional qualifications, which i did in evening school and by correspondence.

Are you just thinking its the years of work type of work that matter more for this idea? (Im not trying to be confrontational, just curious)

But not all will be " gaming the system". It stands to reason that some people will develop health issues that can be debilitating as they age, or existing issues become more severe to the point where they can no longer work or work fewer hours and possibly need carers or mobility aids etc.

Yes, really. It’s not a fully thought out policy (obviously), but generally trying to equalise the number of years “paid in” while working

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?

This is the sort of thing that people really need to get past if they are going to build a decent pension pot on a normal wage.

Take a simple example (ignoring inflation and tax complications, but the point stands): if you save £200 per month for 40 years and invest it in the stock market to generate an average return of 8% (by no means an unreasonable assumption), you'll have just over £700k. But wait! What if there's a massive crash just before you retire and half that value is wiped out? You'd only have £350k, so better to stay in cash and avoid that risk, right?

Well, if you saved the same £200 per month for 40 years in cash and earned 4% (again not an unreasonable assumption), you'd have...about £240k. So still way behind where you'd be if you invested in equities but been really unlucky. As an aside what you'd actually do in practice in the market crash scenario is either gradually transfer to safer investments in the run-up to retirement (so granted you'd would quite get to the £700k), or you'd just remain invested and in time claw back some of your losses.

The point is, people often have the risks and rewards of equity investing hugely out of kilter - they'll focus straight on the 'massive crash' bit while ignoring all the other years that provide much better returns than cash.

Not sure about 8% as an average but there is no doubt, if you have 10 plus years, SM can be a great investment.

Pensions however, are unlikely to be investing in the Higher risk, Higher returns markets.

Also worth remembering that the 2 most recent crashes, GFC, Covid, markets bounced back higher within a year or two than pre crash.

I do think Equity Release schemes should stop being such a rip off. A lot of people are asset rich, cash poor, with kids who can’t afford to leave or a huge stamp duty bill to pay if they face downsizing.

And eat less food? Can Britain as an island grow enough food to sustain its current population without having to rely on imports? In short - no we can't.

What happens if we see a big increase in population and have to build on farmland in order to house everyone - what then? More mouths to feed and even less land to produce it. And an even bigger trade deficit.

What happens when the countries we import food from decide that they can't sell it to us any more because they need it to sustain their own growing population?

The human overpopulation issue is a global one, and is way more significant than pensions (I used to work for an IFA by the way, so I do know how pensions work).

That would mean I couldn't retire until I was eighty, from my very manual job, as I didn't start full time work until all my children were at school. I was awarded NI credits from receiving child benefit though, so those years count towards my pension.
Not everyone works continuously from age 18 until retirement without a break, whether that's unemployment, travel, raising children, studying, going part time etc

So you’d get credits for that, in the same way that happens now.

But if someone starts their working life later, surely it’s fair for them to also work longer?

And, individual experiences notwithstanding, most people who start work later do so because they’ve been in further / higher education - presumably with the aim of having more earning potential. So if they want to retire earlier, they can save to do so.

I don’t think you should get credit for travel or other voluntary unemployment, though, That’s the choice you make,

Yep fair enough, the average compound return of the MSCI World Index (a benchmark global equity index), over the last 40 years when measured in £ has been just over 7% per annum. Obviously that's nominal and not taking inflation into account, but you need to take inflation into account when saving in cash too (which often results in near zero, or even negative, real returns). So maybe I was being a little optimistic, but not much and not nearly enough to change the analysis.

I don't really understand the bit about pensions not being invested in high risk/high return assets - with a modern DC pension you've usually got a decent choice of how to invest and you can go for higher risk/reward funds...all of mine is in global equity trackers, it's a bog standard approach.

And I totally agree about markets usually bouncing back quickly; since I started investing we've had the global financial crisis, the Euro area debt crisis, Brexit, covid, various wars etc. All of which knocked markets, and all of which are now a blip in the rear view mirror.

Or become ill or need benefits

Oh 100%, i wont go into my main investments, much broader based, but i put £3000 into a FTSE index tracker PEP, in the 90's, its now worth 22k, obviously 100% equities, so higher risk than most would advise.

Had i put it in a 4% Bank account over 30 years, it would have grown to around £10k.

But of course, in the 2010s, interest rates very low, 4% would have been an impossibility, so returns even lower.

What jobs would you have people working in? Working from home isn’t an option any more for a lot of jobs due to the Tory (and Reform) ideology driven “back to the office” (and save our rental income).

Many disabled people could actually work but it was taken away.

Well the only answer I can think of is to have more immigrants to help address the unbalanced age profile in the population, pay our pensions and also do the jobs that British people don’t seem to want to do. Clearly the numbers coming in must be managed.

i agree that we shouldn’t build on farmland - or at least it should be largely avoided. As I said in my original post, we are
going to have to get used to living in much smaller homes. In many countries it is the norm to live in a small flat. So, I think that is what will eventually have to happen in the UK. Obviously we can’t change our housing stock overnight.

What’s your suggestion for paying pensions?

IHT calculation on a million £ property:

Inheritance Tax (IHT) in the UK is charged on estates over a certain threshold, with some key allowances and exemptions. Here’s a breakdown for both a single person and a couple, based on a £1 million property being the main (or only) asset.

1. Single Person

Key Allowances:
Nil-Rate Band (NRB): £325,000 (no IHT paid up to this amount).
Residence Nil-Rate Band (RNRB): Up to £175,000, if the home is passed to direct descendants (children, grandchildren, etc.).

If both apply:
£325,000 + £175,000 = £500,000 tax-free

Taxable Amount:

£1,000,000 (property value)
Minus £500,000 allowances
= £500,000 taxable

Tax Rate:

IHT is 40% on taxable estate.

Tax Due:
40% of £500,000 = £200,000

2. Married Couple or Civil Partners

When one spouse dies, their unused allowances can transfer to the surviving partner.

Combined Allowances:

NRB: £325,000 × 2 = £650,000
RNRB: £175,000 × 2 = £350,000
Total: £1,000,000 tax-free

If the property is worth £1 million and left to children/grandchildren:

Tax Due: £0
(No inheritance tax because the total estate value equals the combined allowance.)

We don’t need to move into flats and keep bringing people in. They too will age, it’s unsustainable.

What an outrageous statement.

How do you know most disabled people choose not to work and prefer handouts? Are you sure it's not the case that there is a reluctance among employers to employ disabled people? What about accessibility -are all workplaces are accessible? Last place I worked at (leisure centre) had steps outside the front door (no ramp) plus the lift in the building was usually broken . Do employers have the flexibility to make adjustments so that disabled people can attend to their health needs in a working day or go to medical appointments?

As someone who has recently become disabled and unable to work, getting these handouts (as you call them) is incredibly hard. I have had to fill out forms the length of War and Peace, gather shed loads of medical letters, plus get letters of support from family, former employers and my GP, then I had to undergo medical assessments and then wait anxiously for weeks and weeks to get refused - because the medical professional did not understand my health condition. Then I had to start the whole process again. The effort of doing all this actually gave me a relapse. (I have a fluctuating illness).

These disability benefits are incredibly hard to get so, almost without exception, anyone who gets them really deserves them .

State pension can be funded by paying more NI/Tax.... i'd have thought that was obvious?
Hunts NI cuts will continue to cost the Govt around 10bn per year, without accounting for inflation.

People who want low taxes have to explain how we get to keep things like the SP.

Growing the economy seems to have escaped all parties so far, we had virtually none between 2010 and 2024, other than by increasing immigration, which drove Sunaks GDP growth, we allowed in 1m extra people, most of who were dependents.

Labour have had a year and their latest idea is to allow pubs to open up with even less restrictions on music and drinking hours, brilliant for those unfortunate enough to live near one, not too mention those who work in AE or for the wider nations health.

No. I was responding to someone saying you don’t need a huge pension pot
My comment, as did theirs, had nothing to do with reduced state pension

I do worry about it. We can't save enough in pensions, or general savings, because of the extra care our autistic DS needs.

I'll have to do at least some paid work for as long as I'm physically able and can find someone to employ me. I'm envisioning a cold and miserable old age.

This is a looming problem though isn't it - unaffordable house prices. Which means many people will be paying rent after they retire.

Yeah 20 years of even the cheapest rent - eg in an over 55s development - is going to be £££. You're going to need an annuity of £10,000 just to cover that and council tax. That's at least a £250,000 pension pot, and it's spent without you even stepping out the front door.

Yes which is why the government need to build more social housing so they are not paying pensioners’ sky high private rents in the not too distant future.