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Is an ageing population the major threat to the UK economy?

Over the last few days the headlines regarding the UK economy have been fairly negative with an expected impact from the problems within the euro zone. However, more and more analysts and economic advisers are suggesting that the ever ageing UK population is the one major threat to the prosperity of the country in the medium to longer term. So how can this be?

The problem with an ageing population is that medical costs, pension costs and other benefit costs will balloon in the future. Despite the fact that more and more people are working beyond their retirement age this is something of a double edge sword because it does effectively reduce employment opportunities for those leaving school and further education. When you also consider the enormous pension funding problem within the UK, with the state pension under pressure and the final salary pension scheme in its last throes of life in the private sector, there really are some major issues to consider in the long term.

One problem which any government will have here is that voters want to see action now and planning for the future may well include short-term pain which will not be appreciated in the run-up to the general election. However, no matter how difficult the short-term situation may become we need to look at the longer term as significant funding shortfalls become more and more apparent.

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