(UBS Pensions Series 031) Immigration or bust? Options for securing the future viability of the UK state pension system

Les Mayhew

FMG Discussion Papers from Financial Markets Group

Abstract: As a result of population ageing and declining fertility, the UK state pension system is unlikely to remain viable in the very long run without a steady inflow of young immigrant workers from abroad. However, with prudent economic management and continuing economic growth, immigration requirements can be contained and modest real increases in pensions are a possibility. Beyond 2020, further ageing of the population will lead to fiscal pressures and the need for remedial measures such as the raising of the state pension age. Higher economic activity rates among older people, including deferred retirement, will to some extent ameliorate but not eliminate these pressures. If fertility picks up over the next few years, this will also help, but not until after 2030. Without favourable economic growth, the fiscal problems will appear much sooner and could lead to cuts in pensions or to significantly higher contribution rates.

Date: 2004-12
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