UK STATE PENSION

In their July 2025 Fiscal Risks and Sustainability Report, The Office for Budget Responsibility (OBR) included a targeting the basic state pension. In the Introduction to their report, the OBR summarised the UK’s financial position thus:

‘At the end of 2024, the UK government’s deficit stood at 5.7 per cent of GDP, around 4 percentage points higher than the advanced-economy average. This is the third highest among 28 advanced European economies, and the fifth highest among 36 advanced economies (after France, Slovakia, the US, and Israel). At 94 per cent of GDP, UK government debt is the fourth highest among advanced European economies, and the sixth highest among advanced economies (after Japan, Greece, Italy, France, and the US). And with its 10-year bond yielding 4.5 per cent at the end of June, the UK government faces the third-highest borrowing costs of any advanced economy after New Zealand and Iceland.’

The OBR commented: ‘Public expectations of what government can and should do in response to emerging threats and future emergencies seem to be rising.’ Of the state pension, the OBR commented: ‘In the state system, recent reforms have introduced a rising state pension age (SPA) linked to life expectancy and a higher flat-rate state pension that is uprated by the triple lock, guaranteeing that it increases each year by the highest of average earnings, CPI inflation, or 2.5 per cent … [with} a potentially significant increase in the direct fiscal cost of state pension spending over the coming decades due to the triple lock and an ageing population.’

The OBR observed that the cost of the state pension had increased ‘from around 2 per cent of GDP in the mid-20th century to around 5 per cent of GDP (£138 billion) today’. They then ‘estimated’ that it would reach 7.7 per cent of GDP by the early 2070s – half a century away. The OBR cited demographic changes, changes to the SPA, and the triple lock as being the main determinants of this estimated increase.

The OBR did not cite the growth rate of the economy. Presently, the UK economy is virtually stagnant despite a tidal wave of immigrants. Productivity, GDP per capita, and living standards must therefore all be falling, while the costs of accommodating the many millions of immigrants swarming in continue to escalate.

The OBR warned that due to higher than expected inflation and low earnings growth had increased the burden of the triple lock and: ‘If this heightened volatility in inflation and earnings were to persist over the next fifty years, this could add an additional 1.5 per cent of GDP (£43 billion in 2024-25 terms) to state pension spending by the early 2070s.’

The OBR observed:

‘Changes to the state pension age, which rose for women from 60 to 65 across the 2010s, and then increased for both men and women from 65 to 66 between 2018 and 2020. This temporarily stabilised state pension spending as a share of GDP in the 2010s. We similarly expect the legislated rise in the SPA to 67 by March 2028 to drive a dip in state pension spending as a share of GDP for a couple of years in the late 2020s (Chart 2.2). Over the projection, in line with stated government policy, we assume a further rise in the SPA to 68 between 2037 and 2039, and to 69 between 2072 and 2074. As discussed below, we estimate that these three SPA increases collectively reduce state pension spending in the early 2070s by around 1 per cent of GDP.’

Also: ‘each single-year increase in the SPA reduces state pension spending by around 0.3 per cent of GDP’. Even so, the OBR regarded the triple-lock as a risk factor due to the possible increases in pensions.

At no stage did the OBR acknowledge that the triple-lock had been introduced due to the erosion of the value of the state pension, or that it is the most miserly in Europe. Nor that other European countries can afford lower retirement ages.

The increases in SPA has only saved the equivalent of 1 per cent of GDP. To put it differently, had the economy not been stagnant and had been growing at 3 per cent per annum, then that would dwarf the savings made on welching on the SPA. Yet everyone reaching the original SPA is basically swindled out of £12,000. A sizeable sum for the poorest and those in poor health.

The report has a statist outlook. It does not examine the threat posed to the state pension by the incompetence and wastefulness of politicians. Instead, it is an exercise in declinism: a belief or policy that the best the UK can expect, or deserves, is the orderly management of decline.

The report is openly, highly restricted – as it states in the Foreword. It focused solely upon ‘three areas of risk’, being pensions, ‘the performance of the government’s financial balance sheet and the risks around the new target for public sector net financial liabilities’ and the costs of ‘climate-related damage and mitigation’. Nothing else was considered, such as the potential costs of ongoing mass immigration or the economic impact of a war with Russia (possibly including its allies of China, North Korea and Iran). Nor did it examine in any way the impact of the lack of economic growth.

The report is gunning for the triple-lock and should be ignored.