State pensioners may be wondering if the cut in National Insurance (NI) announced in the Spring Budget could affect how their payments are funded.
Chancellor Jeremy Hunt announced this week a two percent cut in class 1 employee National Insurance, from 10 percent to eight percent, as well as cut in the class 4 self-employed rate, from nine percent to six percent.
Mike Ambery, retirement savings director at Standard Life, part of Phoenix Group, told Express.co.uk: “Those in receipt of the state pension or approaching state pension age may view a cut to National Insurance as a threat to its long-term affordability.
“In reality the state pension is unfunded and today’s taxpayers are paying for today’s retirees. While the Government is committed to the state pension, the money will be found to pay it.”
But he said there remains a “broader question” about how the policy is funded in an ageing society and whether the triple lock will be affordable for much longer.
He said: “The reality is that the state pension is only going to grow in importance for most people as the current generation of retirees, many of whom have access to generous defined benefit pensions, are joined by a younger group who are more reliant on defined contribution pensions.”
A recent report from the International Longevity Centre warned the state pension age may soon need to be hiked to 70 or 71 due to the ageing population, as a great proportion of the population claims the support.
“The implication that individuals might not receive the state pension until their 70s could exacerbate existing distrust in the system.
“This could potentially lead to genuine concern and anxiety about their future and with a Government needing to encourage people to save for the long term, the focus needs to be on creating confidence in the sector not suspicion.”
Mr Rudden said experts have for many years pointed out that the current state pension system is “deeply flawed” with concerns it could soon be scrapped altogether.
He said the costs of the policy are fast becoming a huge burden for Government coffers. The analyst said: “Research indicates that the projected cost of the state pension will soon exceed the combined budgets for defence, education, and the Home Office.
“The current model, tied to the triple lock, is likely to increase year-on-year. With significant issues facing the state pension individuals must prioritise private pension provision, starting early to benefit from many years of substantial market growth. Planning and self-reliance are crucial for a comfortable retirement.”
State pension payments are increasing 8.5 percent, with the full basic state pension going up from £156.20 a week to £169.50 a week while the full new state pension is increasing from £203.85 a week to £221.20 a week.
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