WILL YOU FALL VICTIM TO BRITAIN’S PENSION TIMEBOMB?
THE total black hole in UK pensions funding has hit a staggering £7.6trillion, Government figures revealed yesterday.
The deficit rose by more than £1trillion between 2010 and 2015, according to the Office for National Statistics (ONS).
Pension experts are warning there is only a third of the money needed for pensions currently “in the bank” and guaranteed by funds.
The remainder is in effect a “promise” which today’s working age population has to hope future generations will keep.
Tom Selby, of investment specialists AJ Bell, said: “The figures are astonishing and bring into sharp relief the reasons behind proposed increases in the state pension age.
“Unfunded state pension entitlements are worth more than double UK gross domestic product – these are promises that will, ultimately, have to be paid for by future generations either through higher taxes, a lower state pension income or a later retirement age.”
Mind-boggling
He added: “In reality people should brace themselves for a combination of these measures over time. A state pension age of 70 or higher is likely to be the reality facing millennials.”
The ONS last measured total pension promises across state pensions, public sector pensions, company pensions and private pensions at the end of 2010 when the figure was £6.6trillion.
The new figures show that of today’s total liabilities, state pension accounts for about £4trillion, some £917billion is linked to unfunded public sector pensions and £300billion to the Local Government Pension Scheme.
Occupational pension scheme liabilities now total £2.3trillion, including about £2trillion in private final salary (defined benefit) schemes and £200billion in trust-based defined contribution schemes.
Former Liberal Democrat Pensions Minister Sir Steve Webb, now policy director at mutual Royal London, said: “The numbers in this report are mind-boggling.” The Department for Work and Pensions said: “These statistics are a snapshot in time and do not take into account future national insurance contributions and the timetable to increase the state pension age, reviewed each Parliamentary term to ensure it is fair.
“The vast majority of private pension schemes work well, helping to provide a secure retirement.”