Pension schemes cost 'to triple'
The annual cost of the UK's unfunded public sector pension schemes looks set to more than triple to nearly £80 billion during the coming 50 years, a report showed.The unfunded schemes are expected to pay out pensions worth around £79 billion a year in today's prices by 2059/60, up from £25.4 billion now, the National Audit Office (NAO) said.
But the report points out that the £79 million sum is before income from employee contributions is taken into account.
It added that when annual funding costs were expressed as a proportion of GDP, the projected increase was "less stark".
Annual payments are expected to reach a peak of 1.9% of GDP between 2018/19 and 2033/34, before falling back to 1.7% of it by 2059/60. The figures compare with a rise in the cost of funding the schemes from 1.5% of GDP to 1.7% during the past decade.
The NAO said it had decided to publish a report into the cost of the schemes to bring greater transparency and understanding to the situation, as there had been much public discussion over their affordability.
Unlike company pension schemes, under which retirement benefits are paid out from money that has built up in the scheme during the years preceding the members' retirement, benefits for workers who belong to the unfunded public sector schemes are paid out of current employee and employer contributions.
The four main unfunded schemes are the Armed Forces Pension Scheme, the Principal Civil Service Pension Scheme, the NHS Pension Scheme and the Teachers' Pensions Scheme.
Payouts to the two million pensioners who belong to these schemes totalled £19.3 billion in 2008/09, a 38% increase in real terms since 1999/2000.
The report said the rise had been driven by more employees retiring each year, which was a substantially more significant factor than people living for longer. Within the total, employee contributions accounted for £4.4 billion, a 56% rise since 2008/09, with the taxpayer's share of the costs standing at £14.9 billion.
The NAO said it had decided to publish a report into the cost of the schemes to bring greater transparency and understanding to the situation, as there had been much public discussion over their affordability.
Unlike company pension schemes, under which retirement benefits are paid out from money that has built up in the scheme during the years preceding the members' retirement, benefits for workers who belong to the unfunded public sector schemes are paid out of current employee and employer contributions.
The four main unfunded schemes are the Armed Forces Pension Scheme, the Principal Civil Service Pension Scheme, the NHS Pension Scheme and the Teachers' Pensions Scheme.
Payouts to the two million pensioners who belong to these schemes totalled £19.3 billion in 2008/09, a 38% increase in real terms since 1999/2000.
The report said the rise had been driven by more employees retiring each year, which was a substantially more significant factor than people living for longer. Within the total, employee contributions accounted for £4.4 billion, a 56% rise since 2008/09, with the taxpayer's share of the costs standing at £14.9 billion.
© 2012 Press Association