State pension means testing fears grow as Bank of England blames 'ageing population' for UK economy

"The story of growth is, I am afraid, quite clear. It has slowed markedly in the last 15 years or so, and this has affected the advance of living standards," Bailey said.

He identified several "strong headwinds" against economic growth, including an ageing population and potential US tariffs. Bailey's assessment comes as Chancellor Rachel Reeves prepares to announce £15billion in public spending cuts in her Spring Statement.

These cuts follow a significant downgrade in Britain's growth forecasts. Some Labour MPs have warned this represents a return to austerity, though the government rejects this characterisation.

Bailey explained that with an ageing population and the "natural end" to increasing female workforce participation, future growth cannot rely on more workers.

This reality "puts more emphasis on productivity and technological change as the driver of growth to come," he noted. The governor stressed that "some quite large technological advance" would be needed to restore pre-financial crisis growth rates.

Prime Minister Keir Starmer is racing to secure an economic deal with President Trump to avoid "reciprocal" tariffs of up to 25 per cent on US imports. Trump has described April 2 as "liberation day" for implementing these tariffs.

He argues that the US is being exploited by countries like the UK that impose VAT on imports. Bailey highlighted that an ageing population presents a significant challenge to economic growth.

With fewer new workers entering the labour market and the rise in women's employment reaching its "natural end," the UK faces structural limitations to workforce expansion.

These economic challenges coincide with mounting pressure on Government finances from state pension costs, which currently account for 46 per cent of the Department for Work and Pensions' annual spending.

The state pension bill reached £124.1billion in 2023/24 and is projected to rise to £169.4billion by 2029/30. This represents a 143 per cent increase since 2010/11, or just over seven per cent annually over two decades.

Edmund Greaves, the editor at Mouthy Money, shared: "Unlike other benefits, the state pension is not means tested. This means significant numbers of pensioners in receipt of the State Pension simply do not need it."

According to ONS data, 49 per cent of over-65s have a net worth of at least £500,000.

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Greaves added: “Former Governments have taken steps to make the state pension bill cheaper. This has included raising the State Pension age, equalising the age between genders and other tweaks to make the bill more affordable.

"But it has always avoided the question of means testing. The state pension level is now at an historic inflection point. For the first time from next year the Government could start to directly claw back a portion of its state pension payments through the income tax system as the annual entitlement finally tips over the personal allowance.

"But while income is subject to direct taxation, the variety of tax-efficient tools available - such as ISAs, pensions and other sources of wealth - means in practice the Government will struggle to claw back significant amounts of state pension given to wealthy retirees.

"This means the poorest pensioners with no access to financial advice now face being taxed on their state pension income, while well-off retirees can simply move money around to avoid additional tax liabilities."