Alarm bells are ringing

IF THE Government Actuary’s Department’s main forecasts are correct, the implications are quite startling.

The calculations suggest that, on their most likely scenario, National Insurance might need to increase for the average worker by up to £1000 a year from the 2030s to keep the notional National Insurance Fund intact.

If all the shortfall in pension costs were to fall on the employee NI contribution, then the rate might have to rise from the current 12 per cent to 17 per cent.

Of course, this extra cost might be shared with employers.

The money could be found by increasing other taxes instead. It would need to come from somewhere.

Alternatively, the Government may have

By Ros Altmann

to reduce state support for pensioners in future.

This would mean further reductions in future state pension payments, beyond those which have already been introduced.

By the end of the 2030s, state pension age is due to rise to 68 and the GAD assumes that it will continue to increase to 70 in the decades after that.

If the state pension age does not rise further, the costs are projected to rise by twice as much – up to 10 percentage points.

If all this fell on employees, that would take contributions for average workers up to 22 per cent of salary.

One thing is clear – the costs of providing for our ageing population have not yet been brought under control.