State Pension spending forecast to rise by £24bn as record numbers approach retirement

Number of people reaching State Pension Age is set to hit a new high in the coming decade.

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According to new study released today (Thursday) by the Resolution Foundation, the number of persons reaching State Pension Age (SPA) at the end of their working life is likely to hit a new high in the coming decade.

Big Welcomes And Long Goodbyes, the 24th study for The Economy 2030 Inquiry, a cooperation with the LSE and supported by the Nuffield Foundation, looks at how major demographic trends will effect the UK economy and labour market over the next decade.

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The increased budgetary strains that an ageing population will place on the UK this decade are often discussed, such as the £24 billion rise in State Pension spending and the £52 billion increase in health spending by 2030-31 compared to 2022-23 levels.

According to the Foundation, these are significant challenges, not least because paying them might push taxes up rather than down over the next decade. However, these are not the only significant changes expected in this decade.

The baby boomer generation will be retiring in droves in the 2020s. In 2028, the number of persons attaining this milestone is expected to top 800,000 for the first time, and will continue to rise after that.

However, an increasing number of job entrants — a result of the millennial baby boom of 2000-2010 – will more than offset this large exodus of employees.

From the middle of the decade, the number of persons turning 22 – the age at which most people enter the labour market – will begin to rise again, on track to reach 900,000 per year for the first time in decades in 2032.

As a result, by the early 2030s, the UK workforce will be slightly younger, even as the population as a whole ages.

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Because young individuals (aged 18-29) are more than twice as likely to freely change occupations as older cohorts, the spike in young employees at the end of the decade might make the labour market more dynamic.

Molly Broome, Economist at the Resolution Foundation, said: “The changing size and shape of Britain’s population will have a profound effect on its economy over the coming decade.

“And while the fiscal pressures that a rapidly ageing population brings are well known, major changes to the jobs we do and how we spend our money are less well understood.

“The coming decade will be marked by mass exits from the labour market as the original baby boomer generation retires.

“But there’ll be an even bigger mass entry in the labour market, as those born in the millennial baby boom start to come of age. These two trends will spark big changes in our jobs market.

“The retirement of baby boomers will cause a huge boom in healthcare spending – and create over a million extra jobs by the end of the decade.

“But it will also spark a boom in the hospitality sector, as this generation are the real spenders when it comes to eating out and socialising.”

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