An increase in life expectancy rates could leave the UK with a multi-billion pound pension bill, according to the International Monetary Fund.
The IMF argues that life expectancy increases over the next three years will cause a £750bn pensions shortfall for the British government.
By 2028, the pension age will rise to 67 for both men and women, and could even rise to 68 by 2046.
However, figures from the Office for National Statistics (ONS) actually exceed these expectations. The statistics forecast that females born in 2010 will live to an estimated 82.3 years, with males living until 78.2 years. This also dramatically increases for one in three children born in 2012, who are expected to live until their 100th birthday.
The additional funding would need to be drawn from both public and private sector pensions, as private sector schemes have faltered recently. The report goes on to suggest that many of us are ill-equipped for a rise in life expectancy.
“With the private sector ill-prepared for even the expected effects of ageing, it is not unreasonable to suppose that the financial burden of the unexpected increase in longevity will ultimately fall on the public sector,” it noted.
It is urging the government to take measures to address the problem now, with higher contributions into pensions from companies and workers, as well as small payout sums upon retirement. In addition, it is calling for an increase in the retirement age.
The IMF report went on to add that the proposals to link life expectancy and age should be implemented.
Further figures from the ‘longevity risk’ report argue that the UK taxpayer will have to foot the bill for this deficit. By 2050, the nation could be steeped in £750bn worth of extra debt and this could make up 135% of GDP, a rise from current levels of 76%.
The UK would need to increase GDP by 1-2% every year to 2050 if they were to reduce this debt.