The UK’s pension liabilities reached £7.6trn, an increase of £1trn between 2010 and 2015, but the figures have been described as “mind-boggling” due to almost £5trn being unfunded promises.
Figures from the Office for National Statistics revealed a total of £5.3trn of these pension liabilities are the responsibility of the government, including £4trn in state pensions. Of the remainder, £2trn is held in private sector defined benefit pension plans, with only £240bn in workplace defined contribution plans.
Individual personal pensions hold £302bn meaning in 2015 they outstripped the amount held in similar workplace defined contribution pensions by 25 per cent.
Commenting, Royal London director of policy Steve Webb said: "The numbers in this report are truly mind-boggling. Today’s population has built up £7.6trn in pension promises but has only set aside about a third of that amount to pay for them.
“The rest will have to be financed by tomorrow’s workers. If we are to have a meaningful debate about how we pay for an ageing population and about fairness between generations, figures like these need to be published on a regular basis and should inform policy-making."
In addition, AJ Bell senior analyst Tom Selby said: “The figures published by the ONS today are astonishing and bring into sharp relief the reasons behind proposed increases in the state pension age. Unfunded state pension entitlements are worth more than double UK GDP – these are promises that will, ultimately, have to be paid for by future generations either through higher taxes, a lower state pension income or a later retirement age.
“In reality people should brace themselves for a combination of these measures over time, although the pace of change will depend largely on the willingness of politicians to tackle long-term issues that transcend the electoral cycle. Certainly a state pension age of 70 or higher is likely to be the reality facing millennials."