Public sector pension costs to rise by 150pc

TAXPAYERS will be forced to fund a 150 per cent jump in public sector pension costs as double-digit inflation prompts the biggest pay rise for retired civil servants in a generation.

The cost of paying the “gold-plated” pensions is forecast to more than double over the next three years alone, because of a rule which dictates all retired Government workers receive a pay rise every spring in line with the previous September’s rate of inflation.

The Treasury is expected to spend £3.3 billion on the scheme in 2022-23, rising to £6.2billion in 2023-24 and £8.2billion in 2024-25, according to documents from the Office for Budget Responsibility (OBR) published alongside the Autumn Statement this week.

It represents an increase of 148 per cent over the next three years.

Laurence O’brien of the Institute for Fiscal Studies said: “The cost of public sector pensions is much higher than the OBR expected back in March.

“The sustainability of public sector pensions is uncertain, in a world of high inflation, low growth and falling wages. It has become increasingly expensive as a proportion of GDP.”

Connor Macdonald, of the think tank Policy Exchange, added: “The Government’s way of funding public sector pensions may need to be rethought. In some schemes, salaries are linked to CPI inflation as well as another percentage rise. These pensions are taking up an increasing proportion of national income each year.”

He noted that pension inequality is growing between ex-public sector and ex-private sector workers, as generous defined benefit schemes that guarantee a set income on retirement have become increasingly scarce outside of Government.