High earning middle-aged men will pay more into the state pension system than they receive in retirement, analysis shows.
A 40-year-old male in the top 10pc of earners would pay around £250,000 of National Insurance (NI) contributions during their lifetime but only receive £248,000 of state pension money if they lived to 90.
By contrast, a middle-aged man on average pay would put in around £138,000 of NI contributions and receive £213,000 of state pension income if he lived to the average male life expectancy of 87, according the the Pension Policy Institute.
Its research compared the lifetime NI contributions of men and women aged 20, 40 and 60 to how much they could expect to collect in state pension income.
Higher paid workers are expected to live for longer than lower earners, and therefore will receive the state pension for longer, the research pointed out. Furthermore, NI contributions are salary-related so higher paid individuals pay in than the lower earners.
Workers pay NI at a rate of 13.25pc on weekly earnings between £242 and £967, and then 3.25pc on weekly earnings above £967. The money is used to pay state benefits including the pension.
The research that last year, a 60-year-old man earning a top wage would have made contributions to cover around 79pc of their expected state pension.
Yet a top-earning 40-year-old may find his NI contributions slightly outstrip the amount of state pension he ends up with. This is due to increases in state pension age and higher NI contributions, according to the report.
On average middle-age men will receive less from the state pension than women of the same age. This is because women have a longer life expectancy and typically earn less over the course of their careers, the report found.
The research is likely to reignite the debate over the affordability of the state pension.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said: “Over time as national insurance rates have increased and state pension ages have been extended, we’ve seen the proportions increase and this could add further fuel to the argument that we need to see further state pension age hikes.”
The report also found that, because the self-employed pay lower rates of national insurance contributions, a 40-year-old self-employed man will receive £248,000 in state pension payments if he lives to 90 after paying in around £192,000.