New research by the Adam Smith Institute reveals that more than 22.7 million people in the UK are expected to depend on state benefits, including pensions, by 2040.
With only 34 million working individuals projected to remain in the workforce by that time, the economic burden on taxpayers is set to rise sharply.
The study warns that by 2036, government spending on welfare, including the State Pension, will exceed the income generated from National Insurance contributions.
This shortfall is expected despite recent increases in National Insurance rates under the current fiscal strategy.
Once welfare expenditure surpasses income, the government will have to rely on the National Insurance Investment Account Fund. This reserve, designed to hold contributions and reinvest surplus funds, will begin to shrink from 2040 onwards, raising questions about the long-term financial sustainability of the State Pension system.
Economists have cautioned that without urgent reform, the UK could face a significant pension funding crisis within the next 15 years.
At the same time, Downing Street is reportedly laying the groundwork for a possible wealth tax. This comes amid a sharp increase in millionaire emigration, with forecasts suggesting that over 16,500 high-net-worth individuals are expected to leave the UK by the end of the year.
This shift in the country’s wealth landscape could further impact tax revenues and increase pressure on public finances as more people become reliant on government support.
As debates intensify around tax policy and welfare reform, policymakers are under growing pressure to address the fiscal challenges facing the UK’s ageing population and welfare system.
