Government changes to retirement rules will not stop anytime soon as pension provision and tax relief continue to take up an increasing share of public spending, Aberdeen Standard Investments' Gregg McClymont has said.
Speaking at a DISCUS debate on managing income in a post-pension freedom world, the Aberdeen Standard Investments head of retirement discussed why the government continued to alter retirement rules and why more change was to be expected.
"I do not think there is any possibility the changes to retirement rules will stop anytime soon. Freedoms are beginning, not the end." said McClymont (pictured). "Pensions cost a significant amount of money - that is why government keeps tinkering, seeking savings."
Of the £750bn annual government budget, a third - £250bn - is spent on social security and welfare, the ex-Labour MP and shadow pensions spokesman explained. Of the six categories included in this segment of the budget, pensions make up more than two-fifths (42%) - or £108bn.
This share, however, he said did not include pensions tax relief which added approximately another £30bn to that figure. By then including the £12bn spend on public sector pensions, it is estimated this amounted to a total of around £150bn.
This worked out at a fifth (20.6%) of public expenditure, compared with less than a fifth (18.7%) spent on health and around a tenth (10.6%) on ‘other', which accounts for debt. In terms of GDP, pensions took up an 8% share, he said.
"The sheer cost of pension provision in the UK underpins government interest in the area," said McClymont.
He pointed out that the median pension income had risen from more than three-quarters of the average working income in 1961, to now more than 100% of that amount.
"Pensioners are now less likely to be poorer than the working age population," he said. "Being a pensioner used to be a proxy for being poor - this has hugely changed."
While there may now be more workers aged between 50-64, McClymont said this was not enough to counteract the reality of rising life expectancy, a low birth rate and a longer period spent in retirement, than was envisaged by the creators of the state pension.
He added that even though average life expectancy had not risen at the pace as was thought a few years ago and that there would be more recalculations yet to come, it would continue to rise regardless, thereby increasing its share of public spend.
"The cost of pensions is going to rise - the government is seeking to slow the rate of increase," said McClymont.
However, the government would most likely find the additional cost in different areas of the budget, he said.
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