The state pension today is very different than when it was first introduced on New Year's Day, 1909. On this day, more than 500,000 people over the age of 70 who had worked all of their lives, had passed a means test and were deemed 'of good character' queued up at their local Post Office to collect a pension of five shillings (25p) which would be worth about £20 in today's money.
Nowadays, things are very different. Now just under 13 million people (men over 65 and women over 64) claim their state pension, with a full one being about £160 per week (this works out at about £8300 per year). One in seven pensioners, that's about two million people in the UK, survive on nothing else apart from their state pension.
The Future Is Bleak
However, the future is bleak for the state pension, and it is becoming increasingly clear how much more important workplace schemes will come into play in future years. At the moment, it costs the UK more than £100 billion per year to pay the state pension, but these costs will continue to rise over the next few decades. According to figures from the Office for National Statistics, by the mid-2030s, the cost to the UK taxpayer of the state pension will be £200 billion and by the 2050s it will be £300 billion.
According to the Centre for Policy Studies' research fellow Michael Johnson, the reason is clear for this increase in costs.
"From 1940 to 2010 the state pension age didn't move at all. In 1940 it was 60 for women, 65 for men, as it was in 2010. But life expectancy over that 70-year period had increased by around 17 years, so we are faced with a fundamental problem that this is something we should have addressed a very long time ago and didn't and therefore to address it now makes it much, much more challenging."
Thankfully, the arrival of auto enrolment has meant that the UK is taking a step in the right direction. Since its introduction, millions of more people are now saving for retirement, helping to ease the burden on the state. Whilst auto enrolment as it exists now will not cure the future pensions crisis, it does help to tackle it and does highlight the need for people to start looking at their own retirement prospects.
More needs to be done though with the state pension says Michael Johnson, who says that a fixed pension age is an unfair lottery, with some getting barely a few years of pension and others getting 30 years or more.
"The life expectancy of the 65-year-old Chelsea man is around about 88. For Tottenham Green man it is about 71. So Chelsea man will enjoy the state pension for about 22 years and Tottenham Green man will enjoy it for approximately five. That seems extremely unjust to me."
Whatever the future of the state pension, it's clear that the population as a whole in the UK may not be able to rely on the fact that it will be there forever or in full, and should actively engage with how they intend to fund their retirement.