Experts are warning the public over the threat posed to the long-term viability of the state pension triple lock.
Every year, pension payments are raised either by the rate of inflation, average earnings or 2.5 percent; whichever is the highest.
As it stands, the rate of the state pension is set to go up by 8.5 percent next year if the triple lock promise is kept.
This means that older households in receipt of this benefit could get a maximum amount of £11,501 a year from next April.
However, many analysts are concerned over the impact this will have on the taxpayer long-term to keep the state pension triple lock as is.
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Patrick Thomson, the head of research and policy at Phoenix Insights, warned that “affordability” is one of the main challenges facing the state pension as it exists today.
He explained: “The state pension is the biggest single part of the social security system and has been the foundation for many people’s retirement income for 75 years.
“Today, the state pension system is at a critical juncture, facing questions over future affordability and intergenerational fairness in the context of an ageing population and long-term increases in longevity.
“Bringing forward the timeline for increasing the state pension age to 68 is a potential lever the government could pull to mitigate some funding challenges. But this could leave up to seven million people retiring later than planned.
As part of its intervention, Phoneix Insights suggested various proposals to the state pension to address the issue of “affordability”.
These include the next state pension age review should be subject to public deliberation and engagement to solidify trust in the process while keeping the benefit non-means tested.
Furthermore, the group recommends increasing the uptake of the eligible for Pension Credit through targeted outreach and introducing a bridge benefit between this payment and Universal Credit for low-income households.
As well as this, Phoenix Insights put forward the idea of a £300million Sustainable Work Fund to better support employers and workers of all ages.
According to the retirement expert, these proposals could alleviate the concerns about changes to the state pension in the future.
Mr Thompson added: “Any increases to the state pension age must be combined with policy interventions to support those unable to work up until their late 60s, so we don’t see more people falling into pre-retirement poverty.
“Phoenix Insights’ research found the vast majority of people believe the state pension exists to ensure everyone has a minimum level of income in retirement, but despite this one in three adults (and half of under 50s) think that there probably won’t be a state pension by the time they retire.
“We need to ensure the state pension system is adequate for those who need it as well as being fair and sustainable for those who fund it.”
