Britain could face £800bn pensions bombshell by 2050, says IMF

 

Britain could face a £800 billion pensions shock by 2050 as a result of its ageing population, the International Monetary Fund (IMF) has warned.

Analysis from the Bretton Woods institution suggests that world economies could be underestimating future longevity growth by up to three years in age.

The result is a potential retirement cost bombshell equivalent to around half of current gross domestic product (GDP) for most developed countries, the IMF said. For the UK the additional bill could be as much as 59% of 2010's GDP, the international body added.

As such the cost could run into hundreds of billions of pounds for future governments. Furthermore, the IMF points out, taxpayers are likely to foot the bill of a population living longer than expected.

"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.

The findings comes in pre-published chapter from the IMF's Global Financial Stability Report.

In its summery, the authors state that the elderly will "consume a growing share of resources" in the years ahead.

But the cost of providing for retirees could be bumped up considerably if people live three years longer than expected, in line with past underestimates.

To offset the additional costs, countries would need extra resources equivalent to 1-2% of GDP every year to 2050, the report suggests. But if the longevity shock occurred today, countries would have to set aside a sum of around half of their 2010 GDP to pay the extra cost over the next 40 years.

"Longevity risk potentially adds one-half to the vast costs of ageing up to the year 2050," the IMF suggests.

After Japan and Germany, the UK is most exposed to the potential threat. The IMF estimates that pension costs could rise by 44-59% of GDP if the population lives three years longer than expected.

The IMF warns that most governments have not come to terms with the risk of escalating pension costs.

It notes that longevity shocks are "not fully recognised in most long-term fiscal plans".

As such, the IMF recommends that governments act now to offset the additional costs and develop a "credible and realistic plan to deal with longevity risk".

Part of this would be an automatic link between life expectancy and state pension age. This would avoid "recurring public debate about the issue".

The IMF also suggests that increased taxation would help plug the shortfall.

PA

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Travel
travelWhy Japan's love hotels are thriving through an economic downturn
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Life and Style
Alexander McQueen A/W 2014
fashionPolitics aside, tartan is on-trend again this season
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Sport
Joel jumps over the board...and into a giant hole
footballFrom joy to despair in a matter of seconds
News
i100
Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Volunteer your expertise as Trustee for The Society of Experimental Biology

Unpaid Voluntary Position : Reach Volunteering: Promising volunteer Trustee op...

Email Designer

£30000 - £35000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

year 4/5/6

£100 - £120 per day: Randstad Education Chelmsford: Are you looking for a full...

MFL TEACHER, SUPPLY VACANCY, LOVELY SITTINGBOURNE SCHOOL

Competitive Salary: Randstad Education Group: The Job We are currently recruit...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week