A growing cohort of young Britons is making financial decisions based on the assumption that the state pension will no longer exist by the time they reach retirement age. According to a new survey from the Resolution Foundation, nearly 40% of people aged 18 to 27 do not expect to receive a state pension, a figure that has doubled in the past five years. This shift in expectations reflects a broader erosion of trust in intergenerational contracts, as demographic pressures and fiscal constraints challenge the sustainability of the current system.
The state pension, which currently provides up to £203.85 per week for a single person, costs the UK government roughly £110 billion annually, making it the largest single item of public expenditure. But with the ratio of workers to pensioners declining from 3.2 in 2020 to a projected 2.9 by 2040, the system faces a structural deficit. The Office for Budget Responsibility projects that by 2050, the cost of the state pension will rise from 4.8% to 6.5% of GDP, assuming current rules remain unchanged. For context, that is roughly equivalent to the entire defence budget today.
Young people are responding to these projections by altering their behaviour. The survey indicates that 34% of Gen Z are saving more into private pensions, while 22% are investing in assets such as property or stocks that they hope will provide income in retirement. A smaller but notable fraction, 11%, have chosen to take on higher-risk investments, including cryptocurrencies, a strategy that carries the risk of catastrophic loss. This shift is not without logic: if the state safety net retreats, individual capital accumulation becomes the only viable alternative.
Yet the policy response lags behind the public's change in expectations. The government's recent review of the state pension age recommended raising it to 68 by 2037, a move that would save an estimated £1.3 billion per year. But such reforms treat a symptom rather than the cause. The fundamental issue is that a pay-as-you-go system, where today's workers fund today's pensioners, becomes unsustainable when the working-age population shrinks relative to the elderly. Without a transition to a funded system or a significant increase in productivity growth, the implicit debt of the state pension will continue to swell.
There are, however, technological and social innovations that could help. Automation and artificial intelligence might boost productivity enough to support a larger non-working population, provided the gains are distributed equitably. Alternatively, a sovereign wealth fund, funded by a carbon tax or resource royalties, could partially pre-fund future pensions, akin to models in Norway or Singapore. But these are long-term structural changes, and young people cannot afford to wait for them to materialise.
For now, the rational response for Gen Z is to plan as if the state pension will not be there. This means higher savings rates, potentially delayed homeownership, and career choices that prioritise income stability over passion. It also means political engagement: those who feel they have no stake in the system are less likely to vote for parties that would preserve it. The current cohort of young Britons faces a stark choice: either force a political reckoning with the pension system's future, or accept a retirement landscape defined by self-reliance. The data suggests they are already choosing the latter.
