As a result of population ageing and declining fertility, the UK state pension system is unlikely to continue to be able to deliver the current level of pensions without some combination of a higher state pension age and a steady inflow of young immigrant workers from abroad. However, with prudent economic management and continuing economic growth, the need for additional immigrants can be contained and modest real increases in pensions are also a possibility. Higher economic activity rates among older people, including deferred retirement, will to some extent compensate but not eliminate these pressures. If fertility picks up over the next few years, this will also help, but not until after 2030. Copyright 2006 Royal Economic Society.
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