The UK’s public finances will come under pressure in the long term as a result of an ageing population, according to a report by the Office of Budget Responsibility (OBR).
Its Fiscal sustainability report 2013, which draws on the 2011-2012 Whole government accounts, projected that the government would end up having to spend more as a share of national income on age-related items, such as pensions and healthcare.
The report found that state pension costs will increase from 5.8% of gross domestic product (GDP) to 8.4% of GDP as the population ages.
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The projected increase is slightly lower than last year’s projection, in part due to the introduction of the single-tier pension, which will reduce spending in 2062-63 by 0.7%.
Sally Greengross, chief executive of the International Longevity Centre, said: “The costs set out today are not inevitable. Increasing the average retirement age by just one extra year could bring in around £13 billion or 1% of GDP.
“Investment in ageing research must be adequate and focused on addressing the big longevity challenges.
“If tomorrow’s pensioners are more unhealthy than today’s, with less access to preventative care, and few new health innovations, costs will be higher than projected.
“Despite the warnings set out today, government does not have an adequate strategy to respond to the challenges posed by the Office of Budget Responsibility.
“All of the political parties must come into the next general election with specific plans on responding to the challenges and opportunities of longevity.
“Inaction is likely to result in higher taxes, and fewer and poorer public services for all of us.”