(Bloomberg) -- Millions of Britons are facing financial hardship in old age unless the government takes bold action, a leading think tank warned on Thursday.
With the over-65s projected to account for a quarter of all people in the U.K. within the next 20 years, the Institute for Fiscal Studies said that Britain is woefully unprepared for the challenges posed by an aging population.
State funding cuts mean that families face the “catastrophic” threat of losing all their assets to pay for old-age care, IFS Director Paul Johnson said in a prepared speech. Meanwhile, many risk exhausting their pension savings before they die, despite new rules requiring firms to enroll workers into a retirement plan.
Changes over the past two decades have left individuals bearing all of the risk, with their retirement prospects blighted by low contribution rates, low returns, the demise of defined-benefit pension schemes and new freedoms that mean few people now use their savings to buy a guaranteed income for life, Johnson said.
Significant tax increases will be needed if spending on publicly funded pensions, health and social care is to keep pace with demand, he warned.
“There is a degree of hubris around our pension arrangements,” he said. “With current pensioners on average better off than ever, the introduction of what will become a near universal single-tier state pension, and auto-enrollment boosting workplace pension coverage to its highest-ever rates, it is easy to think that all is well. It is not.”
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