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The figures from the Office for National Statistics reveal: At the end of 2010, the total accrued-to-date pension obligations of all UK pension providers were estimated at £7.1trillion, nearly five times the UK’s Gross Domestic Product (GDP). The total comprised £5.0 trillion of government obligations and £2.1 trillion of private sector obligations. Of the £5.0 trillion pension obligations for which the UK government was responsible at end-2010, £3.8 trillion were in respect of state pensions (263% of GDP). The latest comparable EU-level estimate (for end-2007) was 278% of GDP. Obligations relating to unfunded pensions for public sector employees in the UK at end-2010 were estimated at £0.9 trillion (58% of GDP). The latest comparable EU-level estimate (for end-2007) was 52 per cent of GDP. Mel Duffield, Head of Research at the National Association of Pension Funds, said: “These are big figures, but it must be remembered that public sector pensions cover millions of past and current workers and, in the case of the state pension, most of the UK population. “Public sector pensions need to be reformed to make them more sustainable. The current burden on the taxpayer is significant, but stripping these pensions back too much will only worsen the UK’s retirement savings crisis. All workers deserve a good pension, whether public sector or private. “Retirement comes with a big price tag and we fear the burden on our society and our economy will only get worse. The core problem is that our society is not saving enough for its old age and so we will have to work longer or save more, or both. Retirement ages are rising and new rules to automatically place all workers in a pension will help, but more needs to be done. “Despite the continued shift away from defined benefit pensions, which include final salary, the lion’s share of obligations for employers is still sitting in those schemes. Whilst defined contribution style schemes do not generate liabilities for employers in the same way, we can expect their importance to grow from later this year.”
The figures from the Office for National Statistics reveal:
Mel Duffield, Head of Research at the National Association of Pension Funds, said: “These are big figures, but it must be remembered that public sector pensions cover millions of past and current workers and, in the case of the state pension, most of the UK population.
“Public sector pensions need to be reformed to make them more sustainable. The current burden on the taxpayer is significant, but stripping these pensions back too much will only worsen the UK’s retirement savings crisis. All workers deserve a good pension, whether public sector or private.
“Retirement comes with a big price tag and we fear the burden on our society and our economy will only get worse. The core problem is that our society is not saving enough for its old age and so we will have to work longer or save more, or both. Retirement ages are rising and new rules to automatically place all workers in a pension will help, but more needs to be done.
“Despite the continued shift away from defined benefit pensions, which include final salary, the lion’s share of obligations for employers is still sitting in those schemes. Whilst defined contribution style schemes do not generate liabilities for employers in the same way, we can expect their importance to grow from later this year.”
Graham Simonseditors@plansponsoreurope.com