According to experts at the Centre for Policy Studies, the national accounts will leave the Government short of funds needed to pay pensioners. Michael Johnson an academic at the CPS said those aged under 35 should prepare for state pensions to be scrapped altogether by the time they retire.
The Mail Online Reports:-State pensions handed out to future generations will be ‘derisory’, with cash reserves set to run out as soon as next year, a report has warned.
A ‘serious flaw’ in the national accounts will leave the Government short of funds to pay pensioners within the next year, according to the Centre for Policy Studies think-tank.
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As a result, the Treasury will soon be forced to raid income tax receipts in order to keep up the payments, it said.
An academic at the CPS warned that the research shows the current level of state pension is ‘unsustainable’.
Michael Johnson called for urgent government action to prevent pensions being ‘watered down to a basic subsistence’.
He said the research suggested that the millions of taxpayers who are currently aged under 45 would face sharp tax increases and would have to wait longer to receive their state retirement income.
Those aged under 35 should prepare for state pensions to be scrapped altogether by the time they retire, he claimed.
An ageing population will see the state pension bill quadruple to £420billion over the next 60 years, official figures released this week show.
Mr Johnson told the Daily Telegraph: ‘It doesn’t matter which government is elected next year, the state pension age will have to go up much faster and sooner than anyone expects to cover the funding deficit.
For Generation Y, aged between 25 and 34, the message from the Government ought to be that the state pension is not viable full stop. But of course, no politician can say this publicly.’
Last night, a Department for Work and Pensions spokesman said: ‘Older people have worked hard and paid into the system all their lives. That is why our reforms are securing the long-term future of the state pension – so it remains strong and keeps pace with increasing life expectancy.’
Mr Johnson said he had shown the figures to senior Westminster sources, who had admitted privately that pension funding was in a perilous state. Funds for the old-age payments – worth a basic £113.10 a week to each pensioner – come from national insurance contributions paid by people working today.
But the report warns that the money in the National Insurance Fund is quickly running out because not enough is coming in – with the surplus falling from £53billion in 2009 to only £29.1billion last year.
If that figure fell to zero, the Treasury would have to resort to taking money from general income tax, Mr Johnson claimed.
The UK’s ageing population is likely to have a dramatic effect on public services, with 65 per cent of the DWP’s spending on benefit currently going to elderly people. There are ten million people in the UK aged over 65. The latest estimates suggest this will rise by 5.5million in 20 years and will nearly double to around 19million by 2050.
Although the retirement age is set to rise, easing the burden on the state pension fund, the number of older people is outpacing the changes. There are three million people aged over 80 – and this is set to almost double by 2030 and reach eight million by 2050.
The taxman faces fresh embarrassment after it emerged thousands more workers had been sent incorrect tax statements.
The blunder comes as HM Revenue and Customs is requesting new powers to take unpaid taxes directly from bank accounts.
Every year, five million workers pay too much or too little via the Pay As You Earn system and receive a new statement telling them how to pay or reclaim their cash.
Now HMRC has admitted ‘thousands’ of these were miscalculated in 2013-14.
HMRC advised employees to tell anyone who questioned their bills ‘not to repay any underpayment’ – and not to cash any cheques until the error was fixed.
The miscalculations are said to have been caused by incomplete information from employers – something the Government had hoped to limit through its £270million ‘Real Time Information’ programme, in which employers must report amounts paid to staff on a weekly or monthly basis.
While HMRC did not yet know how many people had been affected, it would be fewer than 100,000, a spokesman said.