The Office for National Statistics quietly released a survey this morning that should send a cold shiver through the corridors of HM Treasury. Among 18-to-27-year-olds, barely one in three expects to ever draw a full state pension. The rest have already written it off. This is not youthful pessimism. It is a rational response to the arithmetic of generational theft.
Let me put this in terms the City understands. The state pension is an unfunded liability masquerading as a right. Every year, the Treasury kicks the can down the road, assuming that tomorrow’s taxpayers will foot today’s bill. But Gen Z has done the maths. They look at gilt yields, at the national debt now nudging 100% of GDP, and at the BoE’s balance sheet still bloated from quantitative easing. They see a system with more promises than assets. So they are hedging their bets.
Consider the incentive structure. The triple lock ensures the state pension rises by the highest of inflation, earnings, or 2.5%. That sounds generous. But it is a political bribe paid with borrowed money. The fiscal watchdog, the OBR, already flags that the triple lock could cost an extra £45 billion a year by 2050. Who pays? The same cohort who are now saving less for retirement because they doubt the state will deliver. It is a vicious cycle: the less they trust, the less they contribute via National Insurance, the more the system creaks.
This is not a story about Millennial avocado toast. It is a story about capital flight from a failing asset. The state pension is a claim on future tax receipts. As confidence evaporates, the present value of that claim plummets. Young Britons are effectively selling their entitlement short. They are putting money into ISAs and property instead. That is rational. But for the government, it is a liquidity crisis in slow motion.
Labour’s solution appears to be more of the same. A review of the pension age? Perhaps a means test? Each option is a tax rise by another name. The Conservatives talk of intergenerational fairness but have done nothing to prefund the liabilities. Neither party will admit that the scheme is effectively a Ponzi mechanism, dependent on a growing workforce and rising productivity. Neither assumption holds today.
Market volatility in gilt yields already reflects this unease. Long-dated UK government bonds offer a yield that barely compensates for expected inflation. Foreign buyers are stepping back. The Bank of Japan owns more UK gilts than most pension funds. This is not a vote of confidence. It is a canary.
Meanwhile, Gen Z is voting with its feet. The exodus to Australia, Canada, and the UAE is not just about weather. It is a search for jurisdictions where the social contract still has some balance between contributions and benefits. Capital flight in the form of human capital: the most damaging kind.
The bottom line is this. The state pension is a political dogma that defies fiscal reality. Until a chancellor stands up and says the party is over, young Britons will continue to plan for a life without it. And the markets will price in that risk, one gilt yield tick at a time.
