Up in Flames: The State Pension by 2035

• In 2021, the last time that it was measured, the State Pension had a total obligation to the British people of £8.9 trillion;

• This is set to balloon even further, due to the ratchet effect of the triple lock;

• As the State Pension is paid from current tax revenues, rather than from money set aside in a dedicated pot built up during a person’s working life, this is creating an economic burden on working-age people;

• In fact, the average person born in 1956 will receive £291,000 more than they put in;

• This will be exacerbated by Britain’s demographic trends. By 2040, we are likely to have 22.7 million claiming benefits including the State Pension (but only 34 million people of working age to fund it.

• The Adam Smith Institute has built a new dynamic model, taking into account this raw demographic deficit, alongside a number of other factors including, but not limited to, data from the ONS, OBR and HMRC, on population growth forecasts, State Pension contributions, workforce participation, and aggregate pay;

• We found that the State Pension could become financially unsustainable by 2035. We define this as the point at which the state will be spending more on welfare payouts, the greatest proportion of which is the State Pension, than it will be receiving into the National Insurance Investment Fund Account. This is a crisis point for fiscal rules and Treasury spending commitments.