The Government Actuary is suggesting a 5% rise in National Insurance by 2032 to prevent a deficit in the National Insurance Fund used to pay out state pensions, a possibility based on the latest Government Actuary Department projections.

Other options open to ministers to tackle the projected deficit include raising the state pension age, cutting the value of the state pension or reduce spending elsewhere.

Tom Selby, senior analyst at AJ Bell, said: “The latest analysis from the Government’s own actuary paints a grim picture for the future of the state pension. The harsh reality is that, as demographics bite and the Baby Boomers flood towards retirement, the cost of the state pension will inevitably balloon.

“In fact the Government Actuary predicts the fund used to pay out benefits will be exhausted in around 15 years’ time, at which point the Treasury will have to step in to ensure people continue to receive their state pensions.

“These Treasury grants will kick in at £11.6 billion a year in 2030 and increase rapidly to £151 billion by 2060 and £482 billion by 2080 if the system stays as it is.  The options open to policymakers to plug the funding gap are not attractive.

"The Government Actuary reckons a 5% increase in National Insurance Contributions would do the trick – hardly a realistic route for any politician wanting to maintain a grip on power.

Mr Selby added:“Alternatively, the state pension age could rise further, the value of the payment could be cut or other departments could have their budgets drastically reduced. In reality long-term costs will likely be reined in by a combination of the above, but make no mistake – if this nettle is not grasped today, it will be forced on policymakers tomorrow.”