Box sets » Welfare spending » State pension
Welfare spending as a share of GDP this year is relatively high by historical standards and is forecast to rise further as a share of GDP, largely reflecting growing health-related caseloads and an increasing pensioner population. In this box, we explored the factors driving welfare spending as a share of GDP over the forecast, including demographic trends, the state pension age, policy decisions and wider economic conditions.
Pre-measures borrowing is forecast to rise as a share of GDP in 2031-32. This is unusual, as typically at the end of our forecast borrowing would be expected to be falling as a share of GDP. In this box we explored how this pre-measures rise relates to the emergence, or continuation, of long-term pressures identified in the 2026 Fiscal risks and sustainability report. Government decisions taken at this Budget then mean that borrowing remains flat as a share of GDP between 2030-31 and 2031-32.
As life expectancy has increased, successive governments have increased the state pension age, and it next increases between 2026 and 2028 from 66 to 67. In this box, we estimated the impact of this increase on pensioner welfare spending, working-age welfare spending, and tax revenue.
The new SCAPE discount rate, to be implemented in April 2024, increases the present value of future pensions payments and in turn causes employer contributions to rise. Box 4.4 explained the SCAPE rate change and its overall impact on the public finances.
The Government commissioned two reports published in 2017 to inform its review of the State Pension age (SPA): an independent review by John Cridland and a report by the Government Actuary’s Department (GAD). This box summarised the key findings from these two reports.
Our 2018 long-term fiscal projections suggested that, if left unaddressed, the public sector finances would come under increasing pressure over the next 50 years. This box compared our long-term age related spending projections over the period from 2025 to 2065 with those presented in the European Commission's 2018 Ageing Report.
The Office for National Statistics (ONS) published new UK population projections in October 2017, based on 2016 population estimates and updated assumptions for fertility, mortality and net migration. This box compared the latest projections with the previous 2014-based principal projections that underpinned our March 2017 forecast and summarised their effects on our November 2017 fiscal forecast.
In our 2014 Welfare trends report, Chapter 4 reviewed the overall trends in welfare spending. In this box, we considered how responsive welfare spending is to the economic cycle by estimating the elasticity of benefits and tax credits spending as a share of GDP with respect to changes in the output gap (the difference between actual GDP and an estimate of its potential or underlying level). We found that the most counter-cyclical benefits have caseloads closely associated with the economic cycle whereas mildly counter-cyclical benefits are likely to only exhibit cyclicality due to spending varying less than GDP, thereby producing a denominator effect.
We updated our July 2013 analysis of fiscal drag on income tax and NICs to reflect new data, our latest assumptions and the effect of measures announced over the past year. This box outlined how fiscal drag effects income tax and NICs receipts and the long-term assumptions used.
We updated our 2012 analysis of fiscal drag on income tax and NICs to reflect new data, our latest assumptions and the effect of measures announced over the past year. This box outlined how fiscal drag effects income tax and NICs receipts and the long-term assumptions used.
In April 2012, the Office for National Statistics (ONS) published the first set of new statistics on the total gross liabilities of UK pension providers, including the UK government. This box explored how the ONS’ pension liability estimates were calculated for public service pensions and state pensions, and compared the public service estimate to the Whole of Government Accounts (WGA) methodology.
We updated our 2011 analysis of fiscal drag on income tax and NICs to reflect new data, our latest assumptions and the effect of measures announced over the past year. This box outlined how fiscal drag effects income tax and NICs receipts and the long-term assumptions used.
The European Commission (EC) produces its own analysis of ageing pressures for member states every three years. This box contrasted the forecast made by the EC and the OBR for UK age related spending such as pensions, health care and long-term care.
This box set out the various impacts that higher inflation has on the public finances. These include direct effects (e.g. on income tax and debt interest spending), the impact on nominal tax bases (such as household consumption) and the impact on departmental spending.