The UK’s public sector pension liabilities are equivalent to 81 per cent of gross domestic product, according to the National Audit Office.
Figures published by the department reveal public sector net liabilities of £1,493bn, the single largest liability on the government’s balance sheet. It represents 42 per cent of all UK government liabilities or £55,000 per UK household.
By comparison, it is over a quarter larger than the government borrowing and financing reported in the Whole Government Accounts for 2014-15, which was £1,175bn.
In 2014-15, the government made pension payments of £127bn, comprising of around £38bn to former public sector employees and £89bn in state pension benefits. Public sector pension payments, net of member contributions, were equivalent to 1.6 per cent of GDP and around £1,000 per UK household.
“Although government reforms have helped to generate cash and reduce pension costs in the longer term, overall the liability has risen by around a third since 2009-10.
“There is a limit to the level of pensions the government can finance annually as a proportion of GDP without having to reduce spending in other areas or increase income through higher taxes or further borrowing. Nonetheless, it is not clear from the WGA what impact the government’s management of these risks is having,” the NAO explained.
Commenting on the statistics, AJ Bell senior analyst Tom Selby said: “Millions of public sector workers continue to enjoy generous DB pensions which are all but extinct in the private sector. The NAO figures show that liabilities have continued to surge despite the previous government introducing a series of reforms designed to cut costs.
“Public sector pensions are paid for through general taxation, so rises in the costs of these pensions – primarily caused by increases in life expectancy – place further pressure on the already strained public purse.”