OFFICIAL GOVERNMENT WARNING THE STATE PENSIONS TIMEBOMB

Whitehall experts reveal the fund will run out of cash in less than 20 years Workers under 50 will retire with less cash or face big tax hikes to top it up

MILLIONS of workers could end up with a lower state pension when they retire because of the strain caused by Britain’s ageing population.

Government statistics reveal the National Insurance Fund, which pays the state pension, will run out of cash

by the mid-2030s unless drastic action is taken.

Two former pensions ministers said workers under the age of 50 will have to pay more in taxes or face receiving less money in their old age.

The figures were worked out by the Government Actuary’s Department, who used trends in life expectancy to plot spending. All workers earning from £8164 to £45,000 a year pay National Insurance at a rate of 12 per cent of earnings.

Bosses pay NI at 13.8 per cent for those workers.

The GAD are forecasting a five per cent increase in NI contributions split between worker and employer would be needed to fix the system.

It would cost people earning £28,000 an extra £500 a year.

The state pension is operated on a pay-as-yougo system, with today’s workers funding today’s pensioners. People living longer in retirement are pushing the bill up.

It means the Government face cutting the amount of state pension paid, increasing NI contributions or increasing other taxes.

Baroness Ros Altmann, who served as Tory pensions minister between 2015-2016, said: “The current provision for state pension payments that is in law right now is not enough to meet the cost of future pensions.

“There is a potential issue on intergenerational fairness as younger workers face paying more to secure their state pension.”

Altmann’s predecessor, Lib Dem Steve Webb, said: “The Government won’t let the National Insurance Fund run out of money – they will simply top it up from other taxes as they have done repeatedly in the past.”

Pensions experts are urging younger workers not to rely on the state pension.

Andrew Tully of Retirement Advantage said: “Anyone planning to rely solely on their state pension in the future might want to rethink their plans.”

The Treasury said: “In the long run, life expectancy and demographic trends will continue to pose a challenge for the public finances.

“We are committed to improving productivity, reducing the deficit and building an economy fit for the future.”