The UK government’s pension liabilities soared to £6.4 trillion in 2018, up 21% from 2015, according to new figures from the Office for National Statistics (ONS).
Public finance experts said the soaring costs raise questions about the sustainability of the UK Government’s public pension schemes — much of which are unfunded.
In 2018, UK central and local government pension liabilities included £4.8 trillion of state pension entitlements — 224% of 2018 gross domestic product (GDP) — and unfunded defined benefit workplace pension entitlements for public sector employees estimated at £1.2 trillion (55% of GDP).
The 2018 pension liabilities also included funded defined benefit workplace pension entitlements for public sector employees worth £413 billion (19% of GDP).
Former UK pensions minister and LCP actuarial firm partner Steve Webb said: “The state pension system and the pensions of nurses, teachers and civil servants are based on a set of promises which tomorrow’s taxpayers will have to honour.
“The affordability of these massive promises depends on the size of the UK economy in the future.
“What these figures are telling us is that we are now less optimistic about the size of the UK economy, which means that the burden of meeting these pension promises is much greater than previously thought.”
The ONS said the 21% rise over the three years “was largely due to a change in the discount rate assumption from 5% (nominal) to 4% (nominal) in line with international requirements.”
Non-government pension liabilities for private sector employees rose from £2.3 trillion in 2015 to £2.6 trillion in 2018. These included £2.2 trillion of defined benefit and hybrid workplace pension entitlements (103% of GDP) and £347 billion of defined contribution workplace pension entitlements (16% of GDP).