Why I'm Not Relying On The UK State Pension (And You Shouldn't Either)

追加: 2026-05-05

[00:00:00]This report right here, excuse the print quality, proves that the UK government have a major state pension problem. And if you're under the age of 49, well, it's your problem, too. According to an independent review of the state pension age, it would need to rise to age 72 by the late 2050s just to keep the system financially sustainable. And I don't know about you, but I'm not waiting until I'm 72 years of age in order to retire. So, let me be straight with you.

[00:00:26]I don't think I'm going to get a state pension. And honestly, I've stopped caring about it anyway because I've come up with a backup plan that I think is going to allow me to retire early anyway. But before I show you that, first you really need to understand how broken the system truly is.

[00:00:42]Right now, there are three major problems that a UK taxpayer has if they are relying on or expecting a state pension at any reasonable age, if any age at all. And it's applicable to those of you who were born after the late 1970s. And that first problem is a funding problem. The headline here is that Britain's welfare bill now exceeds income tax revenue. This means that we now spend £333 billion on welfare, but we only receive £331 billion in income tax revenue. Essentially, the government is now spending more on benefits and the state pension than it collects in income tax from active workers. Not a great financial position to be in. But the portion that we're focusing on today is the 161.2 2 billion that the state pension is currently costing. It's one of the single largest items on the government's balance sheet, costing us more than debt interest, education, and defense spending. And the cost of that pension is only going to increase over time because of something called the triple lock. It's how the government increased the state pension each year.

[00:01:42]And it's based on these three things.

[00:01:44]And whichever one is the highest, inflation, wage growth for a flat 2.5% is what the state pension gets increased by each year. Seems reasonable. But when pensioners are getting a bigger pay rise than workers, it creates a bit of a problem. In recent years, the pension has grown more than twice as fast as the economy. And with the IFS forecasting that the state pension could rise from 5.6% to 9.6% of national income by the70s, coming at an expense of potentially 100 billion a year. That's a problem when budgets are already stretched and the economy isn't growing at a rate that can support that. Experts say it's fiscally unsustainable and that's just the money problem. Actually, there's also a second problem that's perhaps just as big and that's a demographics problem. This isn't anybody's fault, but it does present some challenges. Check out the green line on this chart. It shows the percentage of the adult population over the age of 65. And look at the trajectory that it's on. It means there is a higher percentage of people getting to pensionable age, meaning more people are becoming entitled to that state pension. When we look at something called the old age dependency ratio, which is the number of people aed 65 and over per 100 working age people, so this is working people that we're talking about now, not just people on the whole.

[00:02:56]This is also going to increase by over 10% in the next decade and a half. It means there's fewer taxpayers, but more money being paid out for the state pension. And just to be clear, that's not me saying that you shouldn't get a state pension. In my opinion, I think we should all be entitled to a state pension, especially for those of us who have contributed to the system our whole working life, which I'm sure is probably most people watching this video. These demographics though put additional pressure on the UK government and how much it needs to spend as a percentage of our national income on the state pension if nothing gives. And when I say nothing gives, I mean literally having to increase the state pension age to over 70. And that's even if you get one at all. And that's not helped on by perhaps what could be a bigger problem over the next few decades. And that's arguably a cultural one. I need to tread carefully here, but let me just share with you the facts. This keep Britain working report captures some of the major problems that we have here in the UK and why I believe the state pension probably won't work out for me personally. Let me fire out some stats for you. Over one in five working age adults are out of work and not looking for work. 2.8 8 million people are economically inactive due to health conditions with another 600,000 forecasted by 2030. A 22-year-old leaving work due to ill health can lose 1 million in lifetime earnings.

[00:04:11]Employers are experiencing sickness absence at a 15-year high costing 85 billion annually. The UK government points out unsustainable costs of £212 billion a year through lost output, additional welfare payments, and increased NHS burden. For what it's worth, here are my two cents on this.

[00:04:28]There are people here in this country that have genuine health struggles. And when life kicks you to the curb, as it invariably does, I feel as a nation, we have a duty to support those who are most in need. But we do also have to be honest about the incentives at play here and what kind of behavior that that also facilitates. To me, when I read headlines like this, I don't really understand how it's possible that somebody can be financially better off through state funded benefits to remain unemployed rather than to re-enter the workforce. as a system replicated at scale that just cannot work and cannot be financially viable over the long term. It's like we've built and facilitated a culture where perhaps in some circumstances it's too easy to take from the system and those kinds of people don't want to contribute to it where let's just be honest those kinds of people have made a rational economic decision that it's easier to take than participate. Let's think about what that means in practice for a moment. fewer and fewer working people, which means lower and lower tax revenues for the UK government, for a state pension that's becoming ever more expensive, in a country that's already absolutely drowning in debt. And even when considering all of that, even for those who have contributed to the system for their whole life, according to the retirement living standards report, the state pension isn't enough anyway. There are three tiers of living standards that have been listed: minimum, moderate, and comfortable, and the annual income requirements for each. along with the details of the lifestyle that you'll get for that, too. The minimum living is pretty basic. Having no car stands out for me the most. I mean, how would you even get on your 7-day UK holiday if you didn't have a car to be able to take you there? I mean, I guess you could always get on the National Express or something, but that doesn't quite sound like fun. Moderate is a little bit more reasonable, but it's certainly nothing lavish. You get a 2e three star holiday and 47 quid a month to basically buy a couple of Domino's pizzas. Comfortable, of course, is where we'd all like to be at. in parts that's probably similar to where I'd be at now, especially when we compare it from an income perspective.

[00:06:28]Anyway, now I don't really do takeaways.

[00:06:29]I don't really spend too much on clothes either, but I would be more than happy with a twoe four-star holiday in the Med and the three-year-old car, which they've said I could have, would actually be an upgrade from the 5-year-old car I've got sat on the drive at the moment with a dead bloody battery. And I'd also have enough money for what looks like a whole Domino's pizza party once a week, too. I mean, I don't know who in the right mind is spending 911 quid a week on takeaways, but there you go. But here's the reality. The full state pension in 2026 pays £241.30 a week or £12,547 a year. It's less than the minimum standard and less than 40% of the moderate standard. And you can absolutely forget about it if you think the government is going to fund you a comfortable retirement. So, even in the very best case scenario where the state pension still exists, you qualify for it, and the state pension age hasn't got any older, well, I don't think me or you are probably anywhere near where we'd like to be in terms of how we envisionage our retirement in the future.

[00:07:27]Now, before I get into this strategy, I wanted to give a little bit of personal context because I think that matters here. Now, all of my income is currently derived from this YouTube channel, and obviously that income is not guaranteed each month. and it relies certainly on all of you lovely people continuing to tune into the channel each and every month. So, with that in mind, I've got three income scenarios using two account types, but one single strategy that still remains the same regardless. I'm also going to use the retirement living standards income as a benchmark, and I've inflicted them to 2045, which gives me a nice early retirement here at age 50. Now, the elephant in the room here is that this data, which you may have already spotted, is just for a single person household. Now, I have a beautiful wife, which I don't plan on divorcing anytime soon, but I just wanted to reference that because I'm only going to be looking at my own uh income situation to ensure that we're still comparing apples with apples here.

[00:08:20]So, to begin with, let me share with you an account which sole purpose is to get me to retire by age 50, and that's the stocks and shares ISA. It's probably one of the single most underused and underrated financial tools that we have here in the UK. but it allows you to obtain tax-free growth, tax-free withdrawal, no minimum age to access it, and it gives me total flexibility of my money. As of right now, I have two accounts with a combined value of £116,300.

[00:08:46]And if I were to grow these accounts at what I'm going to call a minimum moderate and comfortable level of contribution, given my income isn't guaranteed and all that, using a 7% rate of return, which is the long-term inflationary adjusted average of the global stock market by 2045. Here is what my stock sizer could look like.

[00:09:06]Now, I've got to be honest, we're talking some big numbers now on screen, but you may be surprised to know that actually those numbers aren't going to get us to our desired income targets, or at least not at the top end anyway, because if we now use the rule of 4%, which is a common withdrawal rate, well, here is the annual income that each scenario will generate. If we compare that to our inflationary adjusted pension living standards report from earlier on, then you can actually see at best I'm only living somewhere between minimum and moderate retirement from age 50. And just as a reminder, this is exactly what that would pay for. I'm not even going to get a couple of holidays a year for that. So retiring early, yes, but living a lifestyle of luxury and travel, certainly not. So the truth is the stock Iser is only ever going to get me partway there. And I'm fully aware of that given that early retirement goal that I have and that the stock sizer is never going to fully fund my retirement.

[00:09:58]In actual fact, the stock sizer I plan to use as a bit of a bridge until I can access my second account, which is my SIP, which has a minimum pension age of 57 as the current rules. It's one of the most tax efficient accounts that I have at my disposal as I get corporation tax relief on the contributions that I make to my SIP. And just as a point of noting, if you have a personal SIP, then you also get tax relief from the UK government as well. Right now, my SIP is valued at £125,800.

[00:10:29]So, let's play out that situation again, applying that minimum moderate and comfortable level of contribution, assuming the same growth rates, but this time over 27 years. This is where we'll end up. Now, also, let's assume that I'm going to take a 25% tax-free lump sum.

[00:10:44]This is what I'm left with. Using the rule of 4% again here is the income that I could withdraw which would also be subject to tax which is important to note here. On its own these numbers are looking a lot better and even if I add an additional 7 years worth of inflation to the retirement living standards income benchmarks that we spoke about earlier. Well, the numbers still stack up reasonably well. But here's where the magic happens. If I were to combine the income from my stock sizer, which will still be rolling in each month at age 57 with my SIP, then even if I say targeted a moderate lifestyle in retirement. So, say I needed that £71,160, I'd say the odds are probably quite high of me having that. And perhaps it's even more likely that I could actually fall somewhere closer to the comfortable retirement given the potential level of income that I could look to withdraw here. I hope what this demonstrates is that I could definitely look to retire early with this plan, but it's not going to be easy. I'll have to say dead consistent with my contributions over the next 20 years. And even at age 50 to age 57, I may even have to be a little bit frugal if this is something that I really want to do until the income from my SIP is going to kick in. And for full transparency, I do also have an investment property as well, which I've not included within the numbers today.

[00:12:00]But hopefully that will also give me an additional level of income during retirement, too. But when we live in a country where only half of Brits think the state pension will be available for everyone when they retire, having a reasonably good standard of living and retiring early is a lifestyle that I would certainly love to live. And look, even if I don't reach some of those contribution milestones or perhaps the stock market doesn't provide the rates of returns I've set out in this example, let's just be honest, I don't want to be the richest bloke in the graveyard. So, if I do have to curb a little bit of spending during my retirement years so I can retire early and on my own terms, then that's something that I probably will be prepared to do because I definitely don't want to pin all of my hopes on what as of right now is a fiscally unsustainable and a fiscally flawed state pension system. Now, if you do want to learn a little bit more about where I do all of this investing stuff, well, I've made a tutorial to one of the apps that I use, which you can watch here next. That being said, I'll see you over in the next