Fact check: Cost of public sector pensions
- 30 June 2011
- From the section UK Politics
Debate is raging between government ministers and trade unions over how much public sector pensions cost the country - and whether they must be made less generous. Here are some common claims and counter-claims - and whether they are correct.
CLAIM: Britain has an ageing population
FACT: Life expectancy has been increasing over the past century - Lord Hutton's report says it has increased dramatically in the last few decades but future changes are uncertain. According to the House of Commons library, there are now 10.1m people aged 65 and over in the UK - an 80% increase since 1951.
CLAIM: Public sector pensions are going to cost taxpayers more in future years
FACT: A report by Labour peer Lord Hutton forecasts a rise in expenditure to £33.2bn by 2015-16.
CLAIM: The amount the country spends as a percentage of national income on public sector pensions is forecast to fall
FACT: According to forecasts in Lord Hutton's report, the amount spent on public sector pensions is projected to fall gradually to about 1.4% of GDP in 2059-60, from a high of 1.9% in 2010-11.
The biggest factor in all this is the government's recent decision to cut the level of inflation proofing in public sector pension schemes by relating increases to pensions to the consumer prices index rather than the retail prices index.
The Treasury says the calculation makes various assumptions - including that the public service workforce will grow at half the rate of the population for the next 50 years, so the pension costs look as if they get smaller as a proportion of the growing economy.
The Commons Public Accounts Committee has said the exact range of savings was unclear because "sensitivity analyses were not conducted on significant areas of uncertainty such as the size of the public service workforce".
Lord Hutton told BBC One's Politics Show: "We shouldn't rely on that 50-year bet that overall these pensions are sustainable in their current form."
CLAIM: Public sector pensions are "unaffordable"
FACT: The question of affordability depends on how much the government - and the taxpayer - wants to spend on public sector pensions. The government has not set out a fixed amount it considers "affordable".
The Commons spending watchdog - the Public Accounts Committee - has urged it to publish a clear measure or benchmark of affordability and noted that "officials appeared to define affordability on the basis of public perception rather than judgement on the cost in relation to either GDP or total public spending".
In a speech to the IPPR think tank Lord Hutton said the "key challenge" against a background of rising costs was to make pensions "more affordable over the long term to taxpayers".
He said: "We need a better balance so that public service pensions do not become an unsustainable burden on public finances and the wider economy whilst minimising the risk that public service workers will need to rely on means tested welfare benefits in retirement."
CLAIM: The current public sector pension system is "untenable"
FACT: Cabinet Office minister Francis Maude says the current system is "not tenable". PCS union chief Mark Serwotka claims Mr Maude has started using that phrase instead of unaffordable because he has lost the argument. The government has dismissed this argument as "semantics".
There is certainly evidence that the additional cost of public sector pensions in the past has been met mainly by the taxpayer rather than by increased contributions from workers in the scheme.
It is important to note that most of the public sector schemes were altered a few years ago - in general most of them saw their normal pension ages raised to 65 and in the case of civil servants, new entrants are already offered a career average scheme rather than a final salary.
The question is, will these changes be enough in future to keep both sides satisfied?