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Taxpayers are facing a £2 trillion unfunded pensions liability, equivalent to more than £80,000 for every household in Britain, according to figures quietly released by the Government yesterday.
In a document released on its website only a few hours before the Chancellors pre-budget statement, the Office for National Statistics (ONS) laid out the definitive cost taxpayers will have to bear for both the state old age pension and public sector pensions.
The document reveals:
- The total public sector pensions bill is now £810bn, a figure confirmed later in the day in the pre-Budget report. The majority of the state employees are on generous final salary schemes unattainable elsewhere in the UK
- This bill for key public sector workers' pensions has rocketed by 20pc between 2006 and 2008.
- The Government Actuary's Department's estimate of the cost of the state pension due to all workers is £1,350bn as of 2005 – equivalent to almost 100pc of Britain's annual economic output.
The entire bill of around £2.2 trillion would more than triple the size of the national debt overnight. It is entirely unfunded, so will have to be paid directly by future generations of taxpayers, rather than out of a pot contributed to by the pensioners themselves.
The revelations, contained in the ONS's Pensions Trends document, underline the scale of the long-term fiscal crisis facing this and future governments – even before the added costs of the economic and financial crisis are taken into account.
The Treasury itself has never published its own comprehensive calculation of the size of Britain's unfunded pensions liabilities.
A range of institutions, including the International Monetary Fund, the Organisation for Economic Co-operation and Development and ratings agencies such as Standard and Poor's, have warned Britain that unless it takes drastic action over a long period of time, these pensions costs could trigger fiscal crises in the future.
The National Institute of Economic and Social Research has said that in order to fight the rising deficit and combat the added costs of the financial crisis, the Government ought to raise the retirement age for both men and women to 70, or increase the basic rate of income tax by as much as 15p.
The Treasury has always been reluctant to release details of the size of the public sector pensions liability, but in a supplementary document produced alongside the PBR on long-term fiscal projections it said that the bill for public sector pensions had crept up to £810bn.
A recent study from the Institute for Fiscal Studies showed that the final salary schemes offered to public sector employees are even more generous than those given to private sector workers with equivalent pension schemes.
The entire bill of around £2.2 trillion would more than triple the size of the national debt overnight. It is entirely unfunded, so will have to be paid directly by future generations of taxpayers, rather than out of a pot contributed to by the pensioners themselves.
Popular Alliance Comment:
We thought that the banks were encouraged to save for tomorrow. Not Gordon, Spend Spend Spend and "too bad for the future generations because I won't be in power and will be enjoying my lavish state pension."
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