Will the state pension be abolished by the time I retire?

My husband and I recently turned 50 and had our first conversation with a financial adviser. 

He insisted we include two full state pensions in his planning modelling. I am sceptical. 

Both my husband and I are fortunate enough to be likely to be higher rate taxpayers when we reach state pension age and given the state of the nation’s finances and demands on the Exchequer I find it hard to believe the state pension will still be a universal benefit at its current level in 17 years’ time.

A conservative approach would assume we won’t get any state pension, but that runs the risk of us massively over saving (and working) to achieve our desired retirement income if some or all of the state pension is ultimately available to us.

What is the likelihood of us having both full state pensions starting in 17 years’ time?

Steve Webb replies: I often hear that younger people think that there might not be a state pension at all by the time they retire, but your question is slightly different – could a future government retain the state pension but pay less (or nothing), to those with higher incomes?

Whilst we cannot know for sure what a future government might do, there are some clues which make me think it is highly unlikely that planning on the basis of having zero state pension should be your central assumption.

But let us start with the risks.

The idea of means-testing the state pension is not completely new. 

When the first state pension was introduced in the UK over a century ago it was only available to those on low incomes.

And other countries – notably Australia – scale back state pension entitlements for those with higher incomes in retirement.

We also have two recent UK examples of governments taking away support from higher income pensioners.

The first was the decision to restrict free TV licences, which were previously available to all pensioners over the age of 75, to those over 75 and in receipt of pension credit.

More recently, the Government announced in 2024 that it would pay Winter Fuel Payments only to those on pension credit.

This created a huge outcry. In response there was a (partial) u-turn with the result that Winter Fuel Payments are now only available to those with individual income under £35,000 per year.

If a government can take away free TV licences or Winter Fuel Payments from higher income pensioners, might a future government do the same for the state pension?

There are several reasons why I think this is unlikely.

First, pensioners remain a powerful voting bloc. Pensioners typically have the highest rates of voter turnout and are growing in absolute numbers each year.

A politician who takes on pensioners takes a big political risk. The fact that the pensions ‘triple lock’ has survived for 15 years to date across Coalition, Conservative and Labour governments illustrates the point.

It might be tempting to think that it would only be high income pensioners who would be upset by such a move, but I strongly suspect that pensioners as a whole would object.

Policies which start only by affecting those on higher incomes have a knack of gradually being applied to those on middle and lower incomes, so middle income pensioners might assume that they might be next.

A particular reason why this area is so politically toxic is that the state pension is viewed differently to other government payments.

It is a contributory system and people generally feel very strongly that they have paid in and deserve to get it.

Better off pensioners already pay back 40 per cent (or more) of their state pension through income tax, but it would be a very hard sell politically to go further.

Because people approaching retirement have made financial plans based on the presence of a state pension, it would be very difficult for any government to impose means-testing with immediate effect.

More likely, there would have to be a phase-in-period, with perhaps anyone within ten years of retirement getting their pension in full.

But the political problem with this is that a government which made such an announcement would get no savings in public expenditure over a politically useful time-period (ie the next two Parliaments) but all of the grief on day one.

Another thing to consider is that we still have a voluntary system of workplace pension saving. Once people know that they might get less state pension if they save through a workplace pension, this could fatally undermine voluntary pension savings.

To make the policy work, it might be necessary to make workplace pensions compulsory (as in Australia) but this involves adding another potentially unpopular policy into the mix.

Finally, although on present policies the cost of the state pension is set to rise sharply, there are other things that future governments can (and probably will) do to reduce costs, short of means-testing.

I mentioned earlier the generous ‘triple lock’ uprating of the state pension, and sooner or later it is very likely that this will be replaced by a less generous mechanism – perhaps a link to average earnings.

Second, we are in the middle of the latest review of state pension age, and it seems highly probable that this will result in a more aggressive timetable for pension age increases.

We currently only have an indicative date for a move to age 68, but age 69 and age 70 must surely be on the horizon at some point.

In short, whilst you can ‘never say never’, there are formidable political challenges for any government thinking of means-testing the state pension. And there are alternative policies which can reduce the cost of the system without the same political price.

Whilst I wouldn’t want to discourage you from making good private pension provision in any case, my personal view is that a move to means-testing of the state pension is highly unlikely.