State pension crisis looms as Labour faces 'extremely difficult' choice to hike pension age or means test payments

Stephen Lowe, group communications director at Just Group said: "As a result of rising longevity and dropping birth-rates, it is estimated that a quarter of the UK's population will be aged 65 or older by 2050.

"This means that the burden of funding the state pension will fall on a shrinking proportion of working people."

With a review of the state pension age expected in the next 18 months, Lowe suggested if the Government wants to avoid "increasing taxes or means-testing the state pension" it will have to look at options to "increase the age at which people receive the state pension or to moderate the amount paid."

The expert explained that once a benefit is introduced, it becomes "extremely difficult" to cut or remove it, so anyone not yet receiving the state pension should begin preparing for potential changes to avoid financial strain.

Yet new research shows how politically risky any change would be. A huge 94 per cent of people aged over 66 see the state pension as an "entitlement", not a benefit. Just four per cent described it as a benefit, even though that’s how it's classified by law.

More than half of pensioners surveyed said the state pension is still affordable for the country in the long term. Only 18 per cent disagreed, while 24 per cent said they were unsure.

Lowe said: "Neither of these are political vote winners," pointing out that expectations are deeply entrenched and hard to shift.

The survey also reveals how financially dependent many people are on the state pension. Around 44 per cent of people aged 66 and over rely on it for more than half their household income. And 13 per cent said the state pension made up between 91 and 100 per cent of their income.

That level of reliance means any changes could cause serious hardship. The current full new state pension stands at £11,973 annually, or £230.25 weekly, for those reaching pension age after April 2016. For earlier retirees, the basic state pension provides £176.45 per week, or £9,175.40 yearly.

Previous attempts to cut benefits like winter fuel and disability payments have shown how hard it is to withdraw support once it's introduced.

Lowe said: "As we have seen with the winter fuel and disability payments, once a benefit is introduced it becomes extremely difficult to reduce or withdraw that support."

Views on the triple lock policy also highlight a generation gap. About 64 per cent of older people said the triple lock is fair to their generation. But just 16 per cent said it’s fair to younger people, while 18 per cent said it wasn’t fair to any generation.

This generational divide creates another challenge. Ministers must meet the expectations of today’s retirees while managing the growing costs for younger taxpayers.

Future retirees are being urged to plan ahead as many will need private savings to make up the difference if the pension age rises or payments fall.

Lowe warned: "If the Government either limits the amount paid or pushes out the age at which the state pension age can be claimed, then some people will face a wider financial gap than they planned and will need to cover it from their own resources."

Some may be hit harder than expected. Around 62 per cent of people stop working before they reach state pension age, often due to ill health or redundancy.

Lowe said: "One of the best ways for individuals to prepare for this possibility is to build up private pensions and savings. The additional income required on top of the state pension to reach an acceptable minimum living standard – or even a moderate income in retirement – will be achievable for many people.

"The latest PLSA Retirement Living Standards show a couple where both are receiving the full State Pension will already meet the minimum income threshold.

"To bump that up to the PLSA’s moderate retirement living standard, they would need to create around £20,000 additional income per year combined, on top of the current full state pension."

People unsure about their retirement plans are being urged to get advice. The Government offers free help through services like Pension Wise and MoneyHelper.