The state pension system is on the verge of a funding crisis. The National Insurance Fund has been draining rapidly since the financial recession – shrinking from £53 billion in 2008-09 to £29.1 billion in 2012-13. The Government Actuary’s Department (GAD) recently forecast that the National Insurance Fund (the Fund) will be exhausted by 2035-36, but could run out much sooner.
In a new report NICs: The End Should Be Nigh published on Monday 13 October by the Centre for Policy Studies, author Michael Johnson reveals that Fund exhaustion could occur as soon as next year.
“Given that exhaustion is inevitable, the next generation should be advised that their State Pension will be, at best, derisory. Indeed, it would be prudent to plan around not receiving anything at all.”
Furthermore the report argues that the system of National Insurance Contributions is not transparent, is not progressive and burdens companies with its complexity.
In response to the looming funding crisis and defective National Insurance scheme, Johnson urges the Government to undertake the following policy reforms:
“[T]he Treasury will be forced to raid income tax receipts to ensure old-age payouts continue, according to the influential Centre for Policy Studies.”
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“The findings cement a hunch that experts in the field have had for years: that the state pension’s funding position is in serious trouble.”
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