Britain’s public sector pensions bill is now larger than the size of the U.K. economy after it soared past £2.6 trillion for the first time, official figures show. The Telegraph has more.
The Treasury said NHS pension liabilities alone had climbed above £1 trillion, while the cost of future pension promises to millions of public sector workers including doctors, civil servants and teachers ballooned by £333bn to reach £2.64 trillion in the 2021-22 financial year.
The jump in liabilities was driven by a substantial downgrade to Britain’s growth prospects, which raises the predicted cost of funding gold-plated final salary or career average schemes that offer a guaranteed income on retirement.
Sir Steve Webb, a former pensions minister, described the £2.6 trillion figure as “eye-watering” and larger than the size of Britain’s economy.
He said: “If the economy is growing more sluggishly, then the future wealth of the nation is going to be smaller than you thought. So it’s going to be more painful to pay these promises.”
While millions of public sector workers still benefit from gold-plated final salary pensions, most who work in the private sector rely on defined contribution (DC) schemes that link pension payouts to the performance of financial markets.
There are just 700,000 members of active private sector defined benefit schemes across the U.K., according to the Office for National Statistics (ONS). By contrast, millions of public sector workers still benefit from guaranteed DB schemes.
The Treasury figures show NHS pension liabilities now stand at just over £1 trillion. The scheme, which has more than 1.5 million members, is on course to grow even further in the coming years as the Government implements its workforce plan to increase the permanent workforce from 1.4 million to 2.3 million in 2036-37.
It means one in 11 workers could work for the NHS in a decade.
The figures also showed the estimated cost of funding civil service pensions had climbed from £339bn to £377bn in 2021-22. Pension provisions for NHS staff, teachers, civil servants and the armed forces account for most of Britain’s unfunded pensions liabilities.
Worth reading in full.
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Lucky the public sector is amazingly productive and these pensions are so well earned.
I was thinking it is good they retire so soon in order to limit their damage.
Then the only damage they do is financial…
Public sector pensions are no different to state pensions in that they have always been unfunded. Successive governments have continued to kick this can down the road hence the mess we are now in. It is inconceivable that the Prime Ministers of the last twenty odd years or so have not been aware of this looming disaster so the question is why go so public on this now? It’s enough to make a conspiracy realist believe that the grand sale of UK PLC is not far off and we are simply being prepared for it.
Yes, all forms of state pension are Ponzi schemes.
Theywere bad enough when the working age population greatly exceeded the retired population but with baby boomers now retired there are nowhere near enough earners to fund state pensions. The triple lock was a disgusting and cynical electoral ruse but any politician principled enough to abolish it will suffer the electoral wrath of the baby boomers.
I’m sure all politicians have been aware but continued to kick the can because it suited all sides.
I’d suggest 2 things have/are changing though,
1. It’s becoming harder to kick the can. In some areas more than 20% of council tax goes on pensions and it’s only going to get worse.
2. We’re facing a change in government so why not draw attention to it to force them to deal with it (and take the political hit) rather than allow the status quo to continue
Actually, I forgot to state the obvious – no Prime Minister and certainly not MP’s are going to push for the reigning in of State pensions when for most of them it’s the reason they sought election in the first place
Exactly, Politicians do things to promote themselves and to stay elected regardless of cost. Comfortable in the knowledge in that what they started will be paid for by someone else, and that someone else will carry the can for their decisions. Consider for a moment, the source of most of the problems of today, and the origins.
The scale of public sector pension liabilities is another illustration of the importance of economic growth. Annual average economic growth in excess of 2% is essential and eminently achievable if the right policies are adopted.
Liz Truss grasped this but lacked the political skills to implement a pro-growth agenda. Her successor pursues anti-growth policies as did her predecessors back to Blair.
The size and scope of the state need to be reduced radically with cuts in state spending, taxation, and regulation. Cheap and reliable energy is also essential along with incentives to save and invest rather than borrow and spend.
The state is far too large, far too powerful and headcount must be cut (either figuratively, or literally – I’m open to persuasion). Let these parasites find a real job in the real world where people (mostly) progress by competence rather than long-service.
Also, growth isn’t simply a case of ramping up GDP as most of our so-called leaders appear to believe. If GDP per-capita is falling (as it is currently) then we have a mirage.
Fixing the latter is far harder than pretending to fix the former, especially when inflation is eroding the value of money.
“Our” public services.
LOL
The country is divided into two: the private sector, mostly small businesses who pay the taxes; and the public sector administrative state that lives off it. They dictate the rules that maintain their supremacy over the entrepreneurs,and will never willingly yield this power.
The private sector now works up to half a year to pay for it. Time for change.
The blob is parasitic and ‘progressively’ killing the host. There is no symbiosis.
No doubt that this is a preliminary to discussion of assisted dying, completely voluntary of course. Has its appeal but I would avoid it given the ghouls that we have in charge. I heard an estimate that human productivity globally is less than one percent of what it could be if we didn’t have the parasite on our back. There would easily be enough abundance to care for the old in their dotage. Tha parasite sucks more and more and gets you used to it gradually so that they normalize the unthinkable and make you forget that you ever thought otherwise.
Ideally they don’t need to be cared for because they’ve set enough aside to take care of themselves.
Yes that would be far better. But the reality is very different. I read something recently that said that the average Brit doesn’t even have a few hundred pounds put away for a low level emergency like buying a new washing machine for example.
The Labour Party is campaigning on the basis of it ‘has a plan to get your future back’. They don’t have a plan and even if they did it would be doomed to fail. This time that we are moving into has nothing to do with getting your future back, quite the contrary. It will be a time when you will have no familiar foundations, no retrospective glories to appeal to. Essentially as new and alien as stepping onto another planet. In terms of politics you will already see that. The important thing is that the people see that there is no restoration or renewal of the old. What comes next hasn’t been forged yet but it has nothing to do with those power structures. They know that they are dying and so they engage in last gasps attempts. Where we go from here is going to look entirely different to anything that went before.
We talk about how difficult it is to financialize care work. Perhaps we shouldn’t be financializing. Like the editor of the FT said, financialisation is like a species of parasitic wasp which lays its eggs in the body of a host and then takes it over and destroys it. Anyone with any nous can see the doleful future that awaits if financialization isn’t recognised. I don’t even like saying it because it behoves a people to understand it.
There is a real battle up ahead and I don’t know if this is a conscious avoidance mechanism or genuine naivete. Just be are of the situation.
There is a lot of confusion here. Describing the pension liability as a “bill” is incredibly misleading. The best way of thinking of it is how much the government would have to pay a bank to take responsibility for meeting pension commitments under current arrangements. These commitments stretch many decades into the future so it is not as though the government has to pay them now or even in the short term. Comparing it to GDP is comparing capital liability with a single year’s income. It is dramatic but fundamentally irrelevant.
It is also worth noting:
I should add:
I have never worked for the public sector and therefore my pension is private sector.
I do think we will have to reduce government pension payouts .
I don’t suppose it helped when Labour’s Gordon Brown and the Cons George Osborne raided the pension pots.
Not to mention some private sector company ‘raiders’ like the Mirror Group and Marconi – these stole millions from many thousands of people just to prop up share prices.
We’ll get rid of the Conservative Party this election but unfortunately it’ll be 5 years of depression until we get rid of Labour. New beginning in 2029. But will it all be too late. God help us
In the absence of any government savings on the behalf of the public sector employees who ‘contributed’ to their pensions all their working lives; these pensions can’t even be ‘cashed out’. They depend on tax income from those currently in employment.
The UK Government is therefore running a Ponzi scheme.
China, Russia, Norway, Saudi Arabia all have sovereign wealth funds to invest on behalf of their citizens.
Montenegro also has a sovereign wealth fund.
And the Tories have increased the size of thePublic sector over that of Labour (no fan of either being politically marooned).Whilst we in the Private sector had our pensions ruinedand plundered by Tony Blair and Gordon Brown, and the Tories continue the theft, the parasitic politicians and the civil servants, DEI workers in public sector get to continue the leeching whilst they work from home and produce NOTHING which grows the economy.
And they wonder why people have lost all faith in so called “democracy”