Magazine article Public Finance

Treasury Insists Pension Burden Is Bearable

Magazine article Public Finance

Treasury Insists Pension Burden Is Bearable

Article excerpt

Treasury officials have dismissed as erroneous' a new study claiming that public sector pension liabilities have soared to more than £800bn - greater than the UK's national debt.

A report published by the Institute of'Economic Affairs on November 14 says that the burden of future public sector pensions for millions of workers has reached £817bn - around £307bn higher than the Treasury's estimate.

IEA report author Neil Record, a former Bank of England economist, claims that the Treasury's 'unrealistic' estimates are 'far too optimistic because they do not take proper account of trends in mortality, likely future public sector pay increases and market interest rates'.

Record also calculates that the average annual cost of public sector pension benefits as a proportion of employees' salaries do not reflect the amounts being earmarked for pension pots.

He claims this could hinder government attempts to ease the cost of public sector pensions and prevent a future retirement funding crisis across the sector.

Ministers have proposed switching some public sector schemes from payments based on employees' final salary to those based on average salary, while new public employees will be subject to a five-year increase in pension age - to 65 - from 2006. …

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