Looming Retirement Crisis: Falling Birth Rates Could Push State Pension Age to 75 and Beyond
A stark new study suggests that today’s school children may be forced to work well into their 70s to fund the state pension system, a consequence of persistently low birth rates. The research paints a concerning picture of a future where the number of working-age individuals available to support each pensioner dwindles significantly.
The report estimates a potential future scenario where only two working-age individuals are left to support every one pensioner. This is a dramatic drop from the roughly four-to-one ratio observed in 1970. By last year, this ratio had already narrowed to approximately three and a half workers per pensioner. To maintain the current ‘old age dependency ratio’ at this level, the study projects that the state pension age would need to climb to 75 by the year 2093.
“Worse still, in the coming generations this is set to plummet to 2:1,” warns the report from the Centre for Social Justice (CSJ), a think tank dedicated to combating poverty. The implications are significant: “It is one thing for the costs of a retired person’s pension, care and health services to be split between four working age people. It is quite another for the burden to be shared by just two.”
This sobering analysis has drawn mixed reactions from experts. While some find the prospect of raising the state pension age to 75 for current school-aged children “alarming” and believe it could exclude many from receiving any pension at all, others argue it’s not an inevitable outcome. They point to the fundamental reliance and value placed on the state pension by people across society, and suggest the government has a range of other policy levers to manage affordability.
The current state pension age stands at 66 and is scheduled to rise to 67. However, the question of whether it could indeed soar to 75 or even higher due to demographic shifts and other economic factors is a pressing one.
State Pension Age: The Gradual Ascent
The full state pension is set to be worth around £12,500 per year from next month for those with sufficient National Insurance contributions. The age at which individuals can begin claiming this pension is on an upward trajectory. From April 2026, the qualifying age will increase by one month every two months, reaching 67 by April 2028.
The next scheduled increase, to age 68, remains uncertain. Officially, this change is planned for sometime between 2044 and 2046, impacting those born on or after April 1977 – individuals currently approaching their late 40s and younger.
The government is legally obligated to review the state pension age every six years. Consequently, two further reports are being commissioned: one from its in-house actuary and another from an independent expert. These reports will specifically examine the timing of the rise to age 68.
Crucially, the government has indicated, implicitly rather than explicitly, that the “triple lock” pledge is expected to remain in place indefinitely. This pledge ensures that the state pension increases annually by the highest of three measures: inflation, average earnings growth, or 2.5 per cent. The government has committed to upholding this for the duration of the current parliament.
However, analyses by bodies such as the Institute for Fiscal Studies (IFS) have raised questions about the long-term affordability of this commitment. The IFS has previously suggested that the state pension age might need to rise to 69 by 2048–49, and then further to 74 by 2068–69. Such projections would have significant implications for individuals in their 30s and younger today.
Adding to these concerns, Jack Carmichael, a senior actuary at the consultancy Barnett Waddingham, has warned that younger generations could potentially face a state pension age as high as 80. He contends that the escalating cost of state pension payments could outstrip the government’s own financial projections.
“There’s a genuine possibility the state pension age could one day push towards 80, and it’s not scaremongering – it’s simple maths,” Carmichael stated. “This wouldn’t hit today’s pensioners – it’s a long-term issue. But unless we face up to the true scale of how long people are living and what that means for the cost of paying out state pensions, younger generations could be looking at retirement ages that feel completely out of reach.”
In parallel, the minimum age at which individuals can access workplace and other private retirement savings is set to increase from 55 to 57 in April 2028. Historically, governments have tended to maintain a gap of approximately 10 years between the state pension age and the private pension access age, suggesting future increases in one could mirror changes in the other.
The Impact of a Declining Birth Rate
The Centre for Social Justice attributes the impending crisis in part to demographic shifts. “Ultimately, the UK tax burden is shared among proportionally fewer people each year, even as costs increase as Baby Boomers head into old age,” the CSJ report states. “Currently too few babies are being born to maintain the future of our economic model. Without intervention the UK faces poverty, inflation, and sector shortages.”
The CSJ’s “Baby Bust” report highlights that the UK’s Total Fertility Rate (TFR) – the average number of children per woman – fell to a record low of 1.41 in 2024. Alarmingly, the TFR has been below the replacement rate of 2.1 since 1970.
The report clarifies that this decline isn’t necessarily due to mothers having fewer children, as the average family size has remained relatively consistent since the 1970s. Instead, the significant change is the increasing number of women who are choosing not to have children at all. While the female childlessness rate was as low as 5 per cent in 1970, it is estimated to have risen to around 30 per cent for the current cohort of young women as of 2022.
Beyond the implications for policies like the state pension age, the CSJ has also proposed measures to address the falling birth rate. These include:
- Prioritising Marriage: The report suggests a societal shift to place greater importance on marriage.
- Earlier Adulthood: It advocates for adulthood to be recognised as beginning earlier, particularly for men.
- Valuing Motherhood: The report calls for greater societal and economic recognition of the role of mothers.
- Addressing ‘Baby Boomer’ Politics: The CSJ critiques policies that disproportionately benefit older generations, leading to generational inequality.
- Conditional Incentives and Benefits: The report suggests that financial support for families should be linked to certain conditions.
Regarding “Baby Boomer” politics, the report elaborates: “Following economic liberalisations of the 1970s, the asset price boom has delivered extraordinary wealth to the Baby Boomer generation, at the same time making it almost impossible for many young people to buy homes. As the OADR [old age dependency ratio] shifts, people of working age are expected to spend more and more of their taxes on the growing costs of pensions and age-related health and social security costs. Yet, anecdotally, many Baby Boomers do not recognise this generational inequality, and baulk at any suggestion that pension spending must be brought under control.” The report also notes the difficulty some have in comprehending the increased cost of raising a family today compared to previous generations. This creates a challenging political landscape, as reallocating state spending towards younger generations may be unpopular with the powerful Baby Boomer voting demographic. However, the CSJ argues this is essential for progress in family formation and fertility, and for fostering an understanding that future taxpayers are vital for the continuation of state pensions and healthcare.
“We should push back the retirement age. This is, of course, unlikely to alter the fertility rate. But shifting the length of time that people work for, aligning it more with healthy life expectancy, will at least contribute to a positive shift in the OADR,” the report concludes on this point.
In terms of incentives and benefits, the CSJ points to a policy implemented in Hungary. There, maternity benefits were reformed to be calculated based on earnings from the first six months of pregnancy, rather than the preceding 12 months of work. This change reportedly created a stronger incentive for women to declare higher earnings, leading to increased tax receipts in the long term and enabling nearly half of women to maintain higher wages post-maternity leave.
Expert Views: Raising Pension Age Risks Increased Poverty
While the prospect of a significantly higher state pension age is a concern, financial experts suggest there are alternative strategies beyond simply extending working lives. Patrick Thomson, a research, analysis, and policy expert at Standard Life, argues for a greater emphasis on longer working lives, coupled with robust provision of training and flexible work arrangements. He also highlights the importance of encouraging greater private pension savings.
Thomson expressed scepticism about the likelihood of a state pension age reaching 75. “The state pension is one of the most popular parts of our social security system, and people from all walks of life rely on it and value the idea of having it in the future,” he stated. “Projecting forward to what the world will look like, how we will be working, saving and retiring in the year 2093 is not something I’d try to be too precise about.”
He further cautioned that relying solely on increasing the state pension age to control spending could disproportionately affect individuals in poor health or from more deprived areas, who may be less able to work for extended periods or benefit from a longer pension entitlement. Thomson noted that previous increases in the state pension age had led to a doubling of poverty rates among 65-year-olds, underscoring the issue of pre-retirement poverty. “Raising the state pension age without other support for people’s work, health or income is going to make that worse,” he warned.
Kate Smith, head of pensions at Aegon, echoed these concerns. She explained that state pension payments operate on a “pay as you go” basis, funded by general taxation and National Insurance contributions from the working population. “Fewer working age people and an increasing pensioner population means that something has to give,” she observed.
However, Smith pointed out that the state pension age is already scheduled to rise to 68 in the early 2040s. “Increasing it to age 75 for current school-aged children is alarming,” she stated. “Average healthy life expectancy and average life expectancy vary across the UK, reflecting socio-economic conditions and opportunities. Those with the lowest life expectancies would suffer most from an increase in state pension age.”
Smith concluded with a stark warning: “Unless the UK sees substantial increases in both healthy life and life expectancy, raising the state pension to age 75 would mean more people are excluded from receiving the state pension, especially those from lower socio-economic backgrounds.”
