Pensioners face National Insurance raid under radical tax shake-up as 'workers cannot pay more'

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A report from the IPPR is highlighting the fiscal impact Britain's ageing population will have on taxpayers going forward

Pensioners must begin paying National Insurance to help pay for the growing costs that will come from Britain's ageing population, a think tank has warned.

An Oxford professor has called for a fundamental overhaul of Britain's tax system, arguing that the burden must be redirected away from younger workers and towards wealth, property and older generations.

In a new paper published by the Institute for Public Policy Research (IPPR), political economist Ben Ansell contends that demographic shifts make such reform increasingly inescapable.

The research finds that an ageing population will drive nearly 80 per cent of the additional fiscal strain confronting the UK by 2075.

Despite this, successive governments have avoided meaningful structural change, instead relying on threshold freezes and stealth measures that have produced an ever more convoluted system.

The result, according to the paper, is a framework that places a disproportionate load on those in employment, particularly younger earners, while shielding accumulated assets and older homeowners.

Britain's over-65 population is projected to grow from 18 per cent in 2024 to 27 per cent by 2075, with state pension costs and rising health and social care expenditure potentially adding close to 10 per cent of GDP in fiscal pressure over that period.

While ageing currently accounts for less than half of the spending pressures facing the country over the next decade, its share climbs to roughly two-thirds by mid-century.

By 2075, it will represent almost four-fifths of the total burden, far outstripping the long-term costs associated with increased defence spending, the transition to net zero, and reduced migration.

The paper argues that these projections make continued avoidance of structural tax reform untenable. A retiree earning £45,000, £70,000 or £105,000 faces marginal tax rates of 20, 40 and 60 per cent respectively.

A young graduate on the same salaries, once student loan repayments and employee National Insurance are factored in, can face rates of 37, 51 and 71 per cent.

To address this imbalance, Professor Ansell proposes three core reforms: a proportional property tax of 0.65 per cent to replace both council tax and stamp duty; aligning capital gains tax with income tax rates, with an investment allowance safeguarding normal returns; and applying the existing two per cent National Insurance surcharge to pensioners who continue earning.

The professor added: "Britain cannot meet the fiscal challenges of the coming decades simply by asking people in work to pay more and relying on another round of stealth taxes.

"Ageing is going to become by far the biggest source of pressure on the public finances. Yet our tax system has increasingly shifted responsibility towards younger workers while protecting many of those who have benefited most from decades of rising property and asset wealth.

"We need a new fiscal contract: one that raises the revenue the country will need, shifts more of the burden from work towards wealth and property, and is honest with the public about who pays and why."