T
he state pension is looking more unsustainable every day. High inflation — one of the three measures used to decide how much it will increase by each year — has helped the tax bill for the state pension soar to £138 billion in 2024-25. If it continues to increase with the triple lock, it is predicted that the state pension will cost us about 50 per cent more by the early 2070s.
The guarantee is far too generous. Meanwhile, increases to life expectancy and falling birth rates are exacerbating the situation. This is an issue felt worldwide. We have a huge problem on our hands, the difference is that, unlike Britain, Europe is starting to take the state pension crisis seriously.
In Germany, it was announced last week that children will get €10 a month paid into a pension, which they can access when they reach the German state pension age of 67. The scheme, which will begin in January next year, will mean all children between 6 and 17 get a Frühstart-Rente (or early-start pension) fund. When the child turns 18, the government will stop contributing to the account, but account holders can continue to make payments of €10 a month if they wish to do so.
According to Sparkasse, a group of government-backed savings banks, a child who receives the €10 for the full 11 years could see the fund grow to about €107,000 euros by the time they retire (on the assumption that the German stock index, DAX, continues its annual average returns of 8 per cent). This will be in addition to the German state pension.
