Pension payouts in public sector could more than triple over next 50 years

Public sector pension payouts could more than triple over the next 50 years, the National Audit Office (NAO) has warned.

In a report on unfunded public sector schemes, the NAO found they will pay out £79bn by 2060, compared with £25bn this year.

This rise will be due to increased longevity and increases in the real earnings of public sector workers.

The NAO report investigated the costs of the ‘pay-as-you-go’ public sector pension schemes where retired staff are paid out of taxes rather than from an underlying investment fund – the biggest of these schemes are those of the Civil Service, the NHS, teachers schemes in England and Wales, and the Armed Forces.

Last March, these schemes covered 6.5 million people – 2.75 million staff, 1.59 million former employees who had not yet retired, and 2.13 million pensioners, the BBC has reported.

The total payments to pensioners in those schemes rose by 38%, from £14bn in 1999-00 to £19.3bn in 2008-09.

The main cause of the increase was a 23% rise in the number of pensioners during that time as more people retired from work.

But employee contributions also rose by 56% over the same period to £4.4bn, due to higher rates of contribution and more staff making contributions.

Edward Leigh, chairman of the parliamentary committee of public accounts, said: “The projection that total annual payments to pensioners in these schemes will top £79bn by 2059-60 is frightening, although, at least as a proportion of forecast GDP, this does not represent an increase.

“These figures must be used to inform an urgently needed national debate about public sector pension schemes for new entrants.”

Meanwhile, a further seven private sector pension plans have been taken over by the Pension Protection Fund, taking the total number of rescued schemes to 120.

Within the next two years, the fund predicts another 357 schemes could have to be rescued, adding 202,380 members to the 36,799 already protected, the Guardian has reported.

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