Pensions actuary says taxpayers now forking out double amount recipients put in

State pensioners may feel they deserve their payments after paying National Insurnace throughout their working lives but an expert has warned this is not how the system works.

Kevin Hollister, founder of Guiide and Guiide DB, says the taxpayers forking out for today’s payments are funding costs that have drastically increased since today’s pensioners paid into their plans.

The pensions actuary said: “Giving pensioners what they say they ‘paid for’ is actually expecting the young to pay twice as much as they did, or more if the triple lock is maintained.”

Mr Hollister argues that this is because life expectancy has increased and with it the time for which the state is paying out to the elderly.

He said of today’s pensioners: “When they were 30 they actually paid for a 65-year-old’s state pension at the time. Thirty-five years ago, that 65-year-old may have been expected to live for 10 years on average.

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“Now, a 67-year-old may be expected to live for 20 years. Thirty-year-olds working today are paying this 67-year-old’s pensions for twice the amount of time, so it costs twice as much, even without the triple lock.

“This triple lock also didn’t exist when the now 67-year-old was paying other people’s pensions aged 30.”

The rising life expectancy is one reason the Government is looking to increase the state pension age to reduce the period over which the state pension is paid.

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The state pension age is currently 66 but this is set to increase gradually to 67 between 2026 and 2028.

The state pension age will then go up again from 67 to 68 between 2044 and 2046 but ministers are considering bringing this timetable forward.

An independent review into the state pension age was published earlier this year but the Government has pushed back a decision on changing the timetable until the next Parliament.

Many experts have also warned the triple lock policy could soon become unsustainable after it secured pensioners a record 10.1 percent increase this year and is set to increase payments by 8.5 percent next year.

Tom Selby, head of retirement policy at AJ Bell, said: “A central problem with the triple lock is that it is a policy without a clear goal as things stand, randomly ratcheting up the value of the state pension in real terms whenever inflation and earnings growth are below 2.5 percent.

“It also leaves the Government exposed to spikes in inflation or earnings – a flaw which has been brutally exposed in recent years.”

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