Pension liabilities record £1tn increase in five years

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08 Mar, 2018

Pension liabilities record £1tn increase in five years

Total UK pension liabilities increased from £6.6tn at the end of 2010 to a “truly mind-boggling” £7.6tn in 2015, official figures have revealed.

The figures released earlier this week by the Office for National Statistics (ONS) indicate a £1tn increase over a five-year period to when the liabilities were last estimated in 2010. About £4tn of that £7.6tn figure came from state pensions, whilst £0.9tn and £0.3tn came from the unfunded public sector and the Local Government Pension Scheme (LGPS) respectively.

A further £2.3tn was held in occupational schemes. This means that the UK's pension obligations in the private sector made up 124% of the country's gross domestic product in 2015. That's an increase of 102% of GDP compared to 2010's figure, says Professional Pensions correspondent, Victoria Ticha.

The figure includes a whopping £2tn in private sector defined benefit (DB) pension plans. The remaining £0.3tn was divided between trust-based defined contributions (DC) at £0.2tn and £0.1tn in annuities.

The remaining £302bn from that massive £7.6bn figure was taken up by individual personal pensions. Ticha says that this means individual personal pensions outstripped DC by 25% in 2015.

The numbers are “truly mind-boggling”, said Steven Webb, the Royal London director of policy. "Today's population has built up £7.6trn in pension promises, but has only set aside about a third of that amount to pay for them. The rest will have to be financed by tomorrow's workers”, he added. "If we are to have a meaningful debate about how we pay for an ageing population and about fairness between generations, figures like these need to be published on a regular basis and should inform policy-making.

Following the release of the figures, ONS head of national accounts Darren Morgan said the numbers provide "an important snapshot of the liabilities of UK pension providers at a point in time".

"While these are obviously large amounts of money, it is important to remember that the payments will be drawn over many years”. However, he went on to say that the results failed to offer any insight in regards to the sustainability of the pension system in future.

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