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Govt reveals £1.13trn public sector pension liabilities

New figures from the Treasury show the net public service pension liability stands at £1.13trn, nearly half of all Government liabilities.

Released this morning, the ‘whole of government accounts’ are a new way of consolidating financial information from central and local government, the NHS and public corporations in one place. The figures are for the year to March 31 2010.

The Government’s total liabilities, including gilt edged securities, comes to £2.42trn and its total assets £1.2trn. However this does not take into account tax revenue which in 2010 stood at £488bn.

The new approach, known as whole of government accounts, is intended to put government bookkeeping on the same footing as private companies.

The figures are being published to coincide with the Office of Budget Responsibility’s first assessment of the long-term health of public finances.

The report is likely to reignite the debate about the cost and sustainability of public sector pensions, after last month saw teachers striking over changes to their pensions which could see them paying more into their schemes for longer.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. I agree with one or two other comments I have seen that there appears to be no figures, that I know of, on how much could be saved by new public sector employees being offered a money purchase pension and leaving the existing workers with the ones they signed up to.
    Can enlighten us?

  2. Gregor Johnston 13th July 2011 at 9:30 am

    The number Mr Schan askes for is surely irrelevant unless someone can explain why existing public sector workers should be able to accrue rights of a type and at a level unavailable to their future co-workers and to their private sector counterparts. Because ‘they can right now’ is not a good enough argument to justify the right to continue accruing them next year. Because they ‘thought they would always accrue those benefits’ isn’t good enough either – things change.

    Government should do what they can to make pensions a level playing field. The distinction between public and private sectors should be irrelevant. It is a pity we cannot fund final-salary benefits for every worker in the UK, but since we cannot, I would like to see the savings from public sector pension funding being put to good and fair use by increasing state pension benefits for all taxpaying workers.

    Protecting the excessive benefits of one sector at the direct expense of another is not the way forward.

    As I understand it, private sector pension rights accrued thus far are protected so the UK tax payer will be paying for them for many, many decades to come. I can see no logical argument for persisting with such state-sponsored inequity.

    What is being proposed is a dilution of the accrual rates available, but it does not resolve the issue that government funded final salary-related benefits ask the taxpayer to write a blank cheque, which future taxpayers must honour. That is why they should be replaced by money purchase benefits as quickly as possible. MPs, who personally benefit significantly from public sector pension benefits, seem happy with moderate reduction in benefit accrual, but no-one is talking of switching to money purchase (even though, as noted above, the savings could be used to increase state pension benefits for the benefit of all). I wonder why not?

  3. The number Mr Schan askes for is irrelevant as there is no proposal to shift public sector worked to money purchase schemes. The proposal is to move individuals to a Career Average scheme, which is another type of defined benefit scheme. So why prepare figures for something that is not going to happen?

    A better question would be what acrual rate the CA schemes will have?

    After all when the Civil Service scheme was reformed in 2002 tehy were moved from an 80ths scheme (plus lump sum) to a 60ths scheme. When it was later realised that this wasn’t capping costs (duh!) they were moved to a CA type scheme. However the accrual rate was then put up to 1/45th – which is close to the rate that MPs get!

    Until we know the final accrual rates figures cannot be calculated. This is what the unions are supposed to be discussing now with the government.

  4. Gregor, I don’t understand your assertion that the numnber I have asked for is irrelevant. Surely every government should explore all possibilities and avenues for a way forward (not that they actually do). And the answer to why existing public sector workers should be able to accrue rights of a type and at a level unavailable to their future co-workers is simple. Because that is what they were promisedr when they took their rubbish low paid jobs originally. The fact that some of them receive decent wages, now (after many years of not having done so) is no excuse to move the goalposts.
    The point you are making, which is certainly a valid one, is that future (new) workers may feel aggrieved at the older ones but nobody will be forcing them to take the job, will they? Nothing in the situation gives us an easy answer but it does not seem an unfair one to me; just an unfortunate one.

  5. Gregor Johnston 13th July 2011 at 11:24 am


    My point is simply that calculating that number and presenting it to the public suggests that the option it describes is worth contemplating. I don’t think it is, because preserving public sector pension benefits at their present accrual/funding levels for those ‘in the system’ now perpetuates the inequity of public sector funding levels for those lucky enough to be ‘in’, creates grotesque inequality between them and unluckier colleagues in terms of total remuneration, and still leaves private sector taxpayers facing an unquantifiable liability for future benefits enjoyed by public sector workers in future, albeit one that gradually begind to tail off in 40 years’ time.

    There is no reason why public sector benefits can’t be changed to a fairer basis. I don’t believe the basis suggested by your question is fairer (surely it is less fair than the current system).

    And while I sympathise with workers who have to accept changes to their remuneration basis which will probably be negative, there is nothing either in law or in common sense which says that simply because an individual is receiving a benefit now, they should be entitled to receive it ad infinitum.

    You should also bear in mind that no public sector worker has been promised (as you say) pension accrual on a particular basis, ad infinitum. They might have believed that their pension rights were immutable, but that is a different thing, but is not a realistic outlook and certainly doesn’t mean we should continue to fund the current inequitable system. I of course agree that rights accrued to date should be fully honoured.

    I also don’t want to get into the argument of whether public sector workers have been or are poorly paid. That’s besides the point in terms of how pensions are funded going forward; unless you believe that money purchase benefits are somehow unfair. My point is that a fair basis of remuneration can be established without final salary benefits, representing a fairer deal for private sector tax-payers, who would still need to help fund public sector pensions, but would not be on the hook for unknown and potentially enormous future liabilities.

    An environment where public sector remuneration can be fairly valued against the private sector’s, while at the same time drawing a line under the public sector pensions open-ended liability for the taxpayer to cough up in future is what I’d like to see.

    A level playing field for all the UK’s workers, which enables the increase of basic state pension benefits, is surely a far fairer outcome than merely tinkering around with the present system?

    Or you could take Fred Goodwin’s view – he very publicly gave up his £1 million cash bonus but quietly hung on to his final salary benefits uplift. He was a canny lad, Fred, and he knew the value of an open-ended financial promise. No moral comparison intended but it is time the tax payer stopped writing blank cheques for public sector pensions.

    Governements should explore only those possibilities which lead to a fairer outcome all round. Not ones which protect the interest of a minority of taxpayers at the expense of other tax payers and their future colleagues.

  6. MrManc
    I am well aware that there is no proposal to shift the public sector to a money purchase scheme and I would refer you to my reply to Gregor at 10:21 am.

  7. Hello Gregor
    Should you have bothered to come back to this page again I would just like to add that it looks as if, to some extent, we are on the same page, which is headed fairness. Unfortunately we don’t have that right across our society and governments will only address the issue if they think it is in their interests.
    You mention the inequity of public sector funding.
    Look at the salaries, of even very moderate, footballers earn. Not to mention the (top bankers) of course etc etc. It goes on and on.
    You also say there is no reason why public sector pensions can’t be changed. They would beg to differ because they have been lead to believe they would get a pension of X amount. Whether you say it is in law or not means you are just looking at what you can legally do, ignoring the moral issue.
    You don’t want to get into whether PS workers have been poorly paid, because you say it is beside the point. Not for them it isn’t. I know many nurses who went into the job, in years past, knowing they would receive rubbish pay but at least expecting a good pension, which some people now wnat to diminish, becaus they say they can’t afford it, when they can. You know, I’m sure, that we waste so much money on ridiculous things in this country, some of which is related to benefits for immigrants and women coming to this country to have quintuplets. Of course the government would rather not tackle some of these issues because it is politically awkward (or they think it is). Public sector pensions is an easy target, however; especially if you have the right wing press on your side.
    As I said I am sure we are on the same side of wanting fairness but we differ on how to get a result. My feelings, I admit, may be biased by the number of NHS workers (not doctors of course) I know who have actually ended up with pensions nowhere near what the Daily Mail lies about to the rest of the population.

  8. And the answer to why existing public sector workers should be able to accrue rights of a type and at a level unavailable to their future co-workers is simple. Because that is what they were promisedr when they took their rubbish low paid jobs originally. The fact that some of them receive decent wages, now (after many years of not having done so) is no excuse to move the goalposts.


    I also hear bankers say that they wouldn’t have accepted such low salaries if not for the bonuses being paid by the relevant company. They also argue that their bonuses are really contractual due to the established patterns of payment.

    seems very similar to your argument.

    more more more. at someone else’s expense.

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