The Treasury published a summary of the country’s unaudited finances today that showed the total liability for funding public sector pensions has risen by £331.3 billion to £1.13 trillion, showing the decrease in rate at which future cash outflows are discounted to reflect their present value. £220 billion of the rise is estimated because of lower bond yields.
The government said publication is the first ever financial information for the whole of the public sector, covering more than 1,500 public sector units and is the culmination of 10 years of preparation.
The latest data published by the Office for Budget Responsibility (OBR) is expected to bolster ministers’ argument that the pension system must be reformed.
The full audited report is expected to be published in autumn and the government claims they would be the most ambitious report in scope to be produced in any country.
Chancellor George Osborne said the information represented is an effort towards greater transparency. “It lifts the lid on the liabilities built up in the past and the pressures we face in the future”, said Mr. Osborne.
“They show that our deficit and reform plans are not just right for the economy now, but also right for the economy and fair for the country in the future”, he added.
The first OBR Fiscal Sustainability Report correctly captures the liabilities building up for the future British generations. The OBR however, clarified that the nation’s total liability to pay public sector pensions “had nothing to do with changes in the size of prospective pension payment”.
The report also projected that if future pension payments are compared to the country’s Gross Domestic Product (total economic output), the cash value of public sector pensions may fall to 1.4% of GDP in 2060-61 from 2% of GDP, estimated in 2015-16.
“These costs fall as a result of the decision to up-rate pensions in payment by CPI rather than RPI, the current pay freeze and planned workforce reductions”, the OBR report pointed out.