State pension system: UK workers may face retirement at 80 — here’s why

Britain’s future retirees may be forced to work until the age of 80 or shoulder significantly higher tax burdens if the rising cost of the state pension isn’t addressed soon, a leading expert has warned.

While the current plan sees the state pension age rising to 68 by 2048, new economic forecasts suggest that even this may not be enough to keep the system afloat. According to data from the Office for Budget Responsibility (OBR), longer lifespans and the continuation of the “triple lock” guarantee could drive annual state pension spending to an eye-watering £200 billion by the early 2070s.

Pension System Under Pressure from Ageing Population

Currently, the UK spends around £138 billion per year on state pensions—roughly 5% of GDP. But this figure could increase drastically as people live longer and benefit from annual pension increases tied to inflation, wage growth, or 2.5%, whichever is highest.

In its central forecast, the OBR expects the cost to hit 7.7% of GDP by the fiscal year 2073–74, equivalent to £200 billion in today’s money. In a more extreme scenario—where individuals live significantly longer—it predicts pension spending could rise as high as 8.4% of GDP.

Jack Carmichael, a senior consultant at Barnett Waddingham, warns these figures may still fall short of reality. He argues that demographic changes could push annual costs £8 billion higher than the official projections, placing unprecedented strain on public finances unless major reforms are made.

Drastic Measures Could Be Needed

To offset such mounting expenses, Carmichael suggests the UK may have to consider dramatic solutions: either push the retirement age much higher—potentially up to 80—or increase National Insurance (NI) contributions by 50%.

“A more realistic scenario would consider narrowing the life expectancy gap between the most and least affluent groups,” Carmichael explained. “This alone could lead to pension costs growing by around £8 billion annually beyond the OBR’s central forecast. Keeping spending aligned with GDP would require bold policy changes—likely involving a sharp rise in retirement age or taxation.”

Even if the OBR’s more moderate projection proves accurate, the system would still become around 50% more expensive in real terms over the next five decades—a trajectory economists say is unsustainable.

Think Tanks Sound the Alarm

Policy experts have also voiced concern. The International Longevity Centre recently projected that the state pension age may need to rise to 70 as early as 2040 to preserve the current balance between workers and retirees.

Similarly, the Adam Smith Institute warned that the pension system is heading toward a breaking point, potentially becoming insolvent by the late 2030s. According to the institute’s modelling, this critical tipping point could arrive as early as 2037—when payouts could begin exceeding contributions.

Maxwell Marlow, Director of Public Affairs at the Adam Smith Institute, described the situation as “extremely concerning,” noting that current fiscal policies and employment trends do little to avert the looming crisis.

“Based on our analysis, without reform, the pension system may begin operating at a deficit within a dozen years,” Marlow said. “Solving this will require either a complete overhaul, the introduction of means-testing, or a dramatic increase in the retirement age.”

Government Reviewing State Pension Age Again

The government is already revisiting the issue. A statutory review of the state pension age, mandated by the 2014 Pensions Act, is currently underway. This review includes independent assessments designed to inform future policy decisions.

For now, the retirement age is set to increase to 67 by 2028 and to 68 two decades later. But if the financial strain grows faster than expected, these targets could be brought forward—or replaced altogether with more drastic alternatives.

Chancellor Rachel Reeves has publicly committed not to raise National Insurance contributions during the current Parliament. However, long-term fiscal realities may leave little room for such guarantees in future administrations.

The Treasury and the OBR have yet to comment further on the latest forecasts and warnings.