Advisers told to consider the future of state pensions for younger clients
Advisers should advise younger clients to prepare for a future without a state pension, as the current system may not be sustainable. This was the key message from Karen Ward, JP Morgan Asset Management's chief market strategist for EMEA, at the Let's Grow conference on January 22nd. Ward's insights are based on her experience as a former chair of the Council of Economic Advisers at HM Treasury, where she worked closely with Philip Hammond during his tenure as Chancellor of the Exchequer.
The UK's welfare state is under scrutiny, and Ward suggests that the country may not be able to provide financial security for its citizens in the future. This concern is further exacerbated by the UK's low financial literacy rate, with an average age of 12 in terms of financial knowledge, according to Ward. This places the UK behind its international peers in financial education.
The potential removal of the state pension could significantly impact retirees' financial well-being. Research from Quilter, published in August 2025, highlights the state pension's crucial role in retirement income. It found that the state pension constitutes 50% of income for individuals aged 80 to 84 and 47% of household income for those aged 70 to 74. Additionally, a report from the Standard Life Centre for the Future of Retirement, released in December 2025, revealed a concerning trend: an additional 250,000 people aged 60 to 64 are now living in relative income poverty compared to 2010. The poverty rate for this age group has risen from 16% in 2009-2010 to 22% in 2023-2024.
The state pension age is set to increase from 66 to 67, starting in April 2026, which further emphasizes the urgency of the situation. Ward's warning is clear: the UK is setting the stage for a challenging retirement for its youth. Moreover, the trust in financial services has not recovered from the 2008 financial crisis, creating an opportunity for financial advisers to step in and offer guidance to those seeking financial security.
