Title

Auditors have issued a stark warning to the Treasury over the soaring cost of public pensions, amid concerns Whitehall has failed to account for future increases in staffing levels. A National Audit Office report, published on 12 March, estimates the cost of public sector pay-as-you-go pensions, which cover most public staff but not local government personnel, could treble to £79bn a year by 2059, from just £25bn currently. However, the projected figure does not offset income from employees contributions. While auditors predict the £79bn figure does not represent a change in the proportion of UK GDP that must be paid towards public pensions (around 1.7% now and in 2059), they warned the Treasury's own projections do not account for changes in the size of the public sector workforce. Auditors are, therefore, concerned a major rise in civil service, teaching or NHS staff – akin to that experienced under the current Labour government – would force additional new pension costs onto taxpayers at a time when they are already covering significant cost increases linked to longer life expectancy. Amyas Morse, head of the NAO, warned: ‘The Treasury has performed some analysis on the sensitivity of its projections to changing [demographic] assumptions, but has not considered the potentially significant effects of changes in the size of the public service workforce.' A Treasury spokeswoman said the department would look into the NAO's findings and added: ‘As the report highlights, the cost of public service pensions as a proportion of GDP remains below 2% over the next half century.' Privately, Treasury officials said the ‘most important' pensions consideration was affordability, and the fact that costs would remain below 2% of GDP meant the UK was unlikely to face significant challenges paying staff retirements. One source added it was currently ‘very difficult' to assess potential workforce numbers, hence a ‘constant workforce assumption has been adopted'.

Title

WHITEHALL

NAO study raises alarm bells over rocketing pension costs

SUBSCRIBE TO CONTINUE READING