10 million migrants needed to halt pensions crisis

Nov 02 2004 by Brian Amble Print This Article

Up to 10 million migrant workers might need to be enticed to the UK between now and 2025 in order to ensure that pensioners can continue to receive £80 a week from the basic state pension, according to new research.

The forecast is one of number of scenarios facing the UK outlined by researchers at Cass Business School in London.

If Britons continue to retire at the same age between now and 2025, future governments fail to increase national insurance contributions, productivity levels remain static and people continue to live longer, it would not be possible to raise the real value of the state pension for the foreseeable future without large-scale immigration, the researchers claim.

The essential problem is that there are not enough workers in the UK to support pensioners because people are living longer and birth rates have fallen. In 1990 there was one pensioner in the UK for every four workers. By 2030 there is projected to be nearly two pensioners for every five workers.

As laid out in the first Pension Commission report published last month, there are only so many ways to support pension schemes. These are: higher contributions, working longer and a greater working population. If productivity remains static, the UK will have to rely on migrant workers to feed that state pension pot.

Professor Les Mayhew, Director of the Risk Institute at Cass, says in each of the scenarios modelled, the pension contribution shortfalls became increasingly difficult to manage after 2020 regardless of which scenario was used”.

“The UK is facing some tough decisions in terms of state pension provision. We can increase our work force via migration, we can work longer or we can increase contribution payments – even if we do this it only keeps the current state pension system stable until 2030," he said.

Professor David Blake, Director of the Pensions Institute at Cass, added: “The only other option is to combine these factors – work longer, increase migration and increase contribution levels. Expecting everybody to work longer may be unrealistic as activity rates among the over 50s have hardly changed in 25 years, and to make any difference there would have to be a significant change in working habits”

Immigration or bust: Securing the future viability of the basic state pension by David Blake and Les Mayhew.