Staff contributions rise more than Govt payments for public sector pensions

12 March 2010 8:15 am | By Helen Pow

Meanwhile, Government payments to pensioners in these schemes increased 38 per cent to £19.3bn in 2008-09, compared to the amount paid out in 1999-2000.

The NAO says this rise is driven by an increase in the number of employees retiring each year rather than longer life spans while the jump in employer contributions is down to higher staff numbers and contribution rates.

Employee contributions of £4.4bn reduced the taxpayer’s share of costs to £14.9bn in 2008-09.

Expressed in terms of constant 2008-09 prices, the Government Actuary’s Department projects total payments across all UK public sector pay-as-you-go schemes rising to over £79bn a year by 2059-60.

This is before allowing for income from employee contributions. Looking at earnings, which rise more quickly than prices, projected payments reach £28.8bn by 2059-60.

But expressed as a proportion of GDP, the NAO says the projected increase is less stark, as GDP is also assumed to rise.

Projected payments are estimated to reach a peak of 1.9 per cent of GDP between 2018-19 and 2033-34 then fall to 1.7 per cent by 2059-60. This compares with a rise from around 1.5 per cent to 1.7 per cent over the last decade.

National Audit Office head Amyas Morse says: “The Treasury has performed some analysis on the sensitivity of its projections to changing assumptions but has not considered the potentially significant effects of changes in the size of the public service workforce.”

TUC general secretary Brendan Barber says the NAO’s report shows public sector pensions are “affordable, sustainable and far from gold-plated”.

He says: “The real pension problem in the UK is in the private sector where employers are no longer providing pensions to almost two thirds of their staff.

“Taxpayers are now picking up the costs of this retreat through higher bills for means-tested benefits for pensioners.

“The populist campaigns against public sector pensions come either from employer groups who want to distract from their own pensions disappearing trick, or right-wing pressure groups who are deeply hostile to public services.”

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