Pensions minister Guy Opperman has spoken exclusively to Which? about how the government is addressing the challenges of funding the state pension, both today and in the years to come.
The Member of Parliament for Hexham sat down with Which? to answer a range of questions, submitted by Which? members, about pensions and retirement. Many expressed concern about the sustainability of the state pension as it currently stands.
With people living for longer, the financial burden of paying out the state pension is growing. Just last week, it was revealed the government owes £4 trillion in state pension payments.
And earlier this year, a report published by the Government Actuary’s Department found that the pot of money designated to pay the state pension – the National Insurance fund – would be exhausted in less than two decades. It suggested that National Insurance contributions would need to increase by 5% for the fund to break even.
The government has already confirmed that it will be bringing forward the increase in state pension age, to age 68 by 2039 to meet the challenge of funding the state pension in the future. This change will save the taxpayer £74bn by 2045-46.
So we put these concerns directly to the minister, asking him what the government is doing to ensure that the National Insurance fund doesn’t run out – and whether it was considering more radical changes to the way the state pension is funded, by asking current pensioners to make a contribution and spread the load across the generations.
Here’s what Mr Opperman had to say.
Watch: Pensions minister talks about the future of the state pension
When will I get the state pension?
The current state pension age is 65 for men born before 6 December 1953, and between age 60 and 65 for women born between April 1950 and 5 December 1953.
By the end of 2018, the state pension age will equalise for both men and women to 65, and by 2020, the state pension age will reach 66.
State pension age rises again to 67 between 2026 and 2028, and to 68 between 2037 and 2039. No further increases have been planned by the current government.
How much state pension will I get?
The amount of state pension you get will depend on when you qualified for it.
If you qualified for the state pension before 6 April 2016, your weekly state pension will be made up of two parts – the basic state pension and the additional state pension.
The basic state pension is currently £122.30. On 6 April 2018, it will rise to £125.95. The additional state pension you get depends on your earnings throughout your career, but it is due to rise by 3% on 6 April 2018.
If you qualified for the state pension after 6 April 2016, you’re entitled to the new state pension. The full amount is currently £159.55, which will rise to £164.35 on 6 April 2018.
You may get more or less than this depending on the type of private pension you have and how much additional state pension you’ve built up, but you won’t get any less that what you would have received under the old state pension system.
More from our interview with Guy Opperman
Check back to which.co.uk next week to see the second part of our interview with pensions minister Guy Opperman, where he discusses a new initiative to get people thinking about retirement earlier, dubbed the ‘mid-life MOT’.