£800bn pensions shock by 2050 - IMF

Britain's ageing population could lead to the country's pension bill rising by £800 billion by 2050, the International Monetary Fund (IMF) has said.

The research indicates that countries are underestimating how much longer people will live in the future by up to three years, warning of a potential retirement cost bombshell.

The IMF went on to reveal that the extra pensions bill is equivalent to half of most developed countries' current gross domestic product (GDP), while it accounts for 59% of Britain's GDP in 2010. The body added that the pension cost excess is likely to be passed on to the taxpayer.

The IMF report said: 'With the private sector ill-prepared for even the expected effects of ageing, it is not unreasonable to suppose that the financial burden of the unexpected increase in longevity will ultimately fall on the public sector.'

The findings were included in the latest chapter of the IMF's Global Financial Stability Report.

Michelle Mitchell, Charity Director General at Age UK, commented: 'Longer life expectancy is cause for celebration and should not be seen as a burden. However, it does present new challenges - which can be addressed with vision and strong leadership.

'But upping the State Pension Age cannot be seen as the only option. There are still huge disparities in healthy life expectancy across the country meaning that the poorest socio-economic groups would be hit harder by further changes to the State Pension Age - especially those who are in ill-health, caring for relatives or out of work.

'Any further changes in State Pension Age must be made in the context of a strategy to improve health inequalities, a timetable and strategy for the reduction and abolition of pensioner poverty and improvement to state pensions.'

Copyright Press Association 2012