Britain’s public sector pension albatross hits £5.8 trillion
Taxpayers face a bill twice the national debt to fun
Britain owes almost £6tn in gold-plated public sector pensions and no money has been set aside to pay for them, analysis shows.
Retirees will receive almost £57bn this year alone, most of which comes from generous final salary schemes that were eventually replaced because of spiralling costs.
However, Neil Record, a former Bank of England economist, has calculated that public sector workers will have built up £5.8tn in total pension promises by the end of 2025-26 – equivalent to twice the national debt.
Maxwell Marlow, of the Adam Smith Institute think tank, called the pensions a “ticking time bomb”, while Richard Tice, Reform UK deputy leader, said most people were unaware of the real cost.
The Treasury said it did not recognise the figures.
Public sector retirees receive a guaranteed pension for life, rising each year with inflation.
The largest scheme is the NHS, which now pays out £17.8bn annually. Almost £40bn more is shared among other retirees, including teachers, civil servants and members of the armed forces.
Mr Record’s calculations, provided exclusively to The Telegraph and factoring in inflation and wage growth, show Britain will owe £5.8tn in pensions by the end of the current tax year – up almost £1tn compared to the end of 2023-24.
Meanwhile Britain’s national debt is £2.9 trillion, according to the Office for National Statistics.
The numbers also reveal that even if the schemes were closed, paying the pensions already built up would still cost an average of £72.3bn a year until 2105.
At its peak in 2060-61, retirees would receive £132bn.
Mr Marlow said: “The traditional trade-off for lower salaries in the public sector was a large pension at retirement, often early. It made little sense fiscally or logically, but it was encouraged anyway.
“This has led to a reckoning for taxpayers, and with liabilities running at £5.8tn over the next 80 years, it is clear that there should be an immediate halt to the scheme and a retroactive revision to lower liabilities for taxpayers.
“Much like with the state pension benefit, gold-plated public sector pensions are a ticking time bomb. We should defuse this immediately before it goes off in our face.”
Experts believe a major problem with the system is that unlike those in the private sector, public sector schemes are unfunded. Incoming contributions from taxpayers and workers are used to pay existing retirees, instead of being invested to cover future pensions.
The Treasury denied that the system was unaffordable, but official figures show that contributions have only met the cost of outgoing payments once in the past two decades.
As a result, taxpayers have spent £94.5bn on plugging the shortfall since 2005.
The Telegraph: continue reading
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