State pension costs are surging with Government predicting eye watering increases over the next five years.
Around 12.6m people are claiming the state pension with this number expected to surge past 13m in just five years, all thanks to the fact we are living longer. This is great news but undoubtedly puts real pressure on the smaller working population who shoulder the cost.
State pension costs to surge in next five years, here is the breakdown:
- The state pension cost an estimated £112.5bn in 2022/23 rising to £139.5bn in 2027/28 in real terms.
- In nominal terms the estimated increase is more – from £109.7bn to £147.2bn.
- An estimated 12.6m people claimed the state pension in 2022/23. This is expected to rise to 13.1m by 2027/28.
- There were an estimated 1.36m Pension Credit claimants in 2022/23. This is expected to rise slightly to 1.38m in 2023/24.
- We expect the number of Pension Credit claimants to decrease over time as more people qualify for the full new state pension. By 2027-28 there will be an estimated 1.15m claimants.
- However, it remains a very underclaimed benefit with government taking action to boost awareness in recent months.
DWP has released the latest benefit expenditure and caseload figures www.gov.uk/government/publications/benefit-expenditure-and-caseload-tables-2023
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown:
We recently saw the government decide to postpone an increase in state pension age to 68 on the basis of increases in longevity slowing down. This is fair, given the very real prospect that many people simply are not able to keep working until their late 60s, but the headache remains of how to contain these burgeoning costs.
We will likely see the decision revisited after the election and so could see further changes to state pension age, but the role of the triple lock is also likely to come under the spotlight. Brought in over a decade ago to make sure pensioners received decent state pension increases the triple lock has also been criticised in recent years for being intergenerationally unfair. The time has come for a review of the state pension and the triple lock’s role within it to make sure it remains fit for purpose.
The Pension Credit figures also made interesting reading. This is a valuable, yet hugely underclaimed, benefit that boosts the incomes of the poorest pensioners and operates as a gateway to other support such as help with council tax and eligibility for the £900 cost-of-living payment. Government has tried to boost awareness of Pension Credit in recent months and the figures show a small boost in estimated take up from 1.368m people in 2022/2023 to 1.38m the following year. This may look small but balanced against the fact we expect to see the number of Pension Credit claimants drop over time as more people retire on the full new state pension then the uptick could be bigger than first thought. However, it’s likely we still have a long way to go before everyone who qualifies for this important benefit gets it.”
