UK pension liabilities ‘up £1 trillion to £7.6 trillion’

The UK’s gross pension liability across workplace and state provision grew by £1 trillion in five years to hit £7.6 trillion at the end of 2015, according to a report in Investment & Pensions Europe which cites data from the UK’s Office for National Statistics (ONS).

The total included an estimated £4 trillion of unfunded liabilities linked to the UK’s state pension – equal to 213% of GDP.

Other unfunded public sector pension liabilities – including provision for teachers and National Health Service staff – totalled £917 billion.

The Local Government Pension Scheme, a funded defined benefit (DB) scheme, had roughly £300 billion of liabilities.

Private sector defined benefit liabilities were estimated at £2 trillion by the ONS.

Workplace defined contribution (DC) schemes had roughly £240 billion invested in them at the end of 2015.

A further £302 billion was held in individual DC plans, the ONS reported, although this was not included in the £7.6 trillion figure.

Steve Webb, director of policy at Royal London and pensions minister during the period measured by the ONS, said the figures were “truly mind-boggling”.

“Today’s population has built up £7.6 trillon in pension promises but has only set aside about a third of that amount to pay for them,” Webb said.

“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.”

Martin Jenkins, head of pensions at law firm Irwin Mitchell, told the London newspaper City A.M.: “If the UK were a PLC the shareholders would be getting worried by now.

“The government is funding these schemes at a fairly low rate compared with their true costs.

“If you take the NHS pension scheme, the employer pays 16 per cent whereas the actual funding costs of those benefits would be more like 20-30 per cent.”

A spokesperson for the DWP said“These statistics are a snapshot in time, and do not take into account future National Insurance contributions and the recently announced timetable to increase the state pension age, which is reviewed each parliamentary term to ensure it remains fair and sustainable.

“The vast majority of private pension schemes are working well, and continuing to help in providing a secure retirement for millions of people.”