Only recently we were reporting on some positive pension deficit news, but the story looks rather different when you consider exactly what the UK government owes in terms of promised future pension payments, owed to today’s current workforce.
According to the Office for National Statistics (ONS), “total accrued-to-date gross pension liabilities of UK pension providers in respect of employment-related (workplace) pensions and State Pensions” was £7.6trn at the end of 2015. Of that figure (which has grown by £1trn since 2010), £5.3trn is the amount owed to state pension holders.
This wild, terrifying number doesn’t necessary represent a deficit, however, and those currently drawing state pensions needn’t panic. It represents what the government will have to pay to future pension holders when they reach an age to call upon the money.
But of that total money owned in pension promises, the government has so far set aside only around a third – with some £4trn considered ‘unfunded’ with no clear plan for how it will be made up. State pensions are paid by those currently working, so the future labour force would have to foot this considerable bill.
While we’re far from declaring the future failure of state pensions, it would be foolish to ignore the potential risks to those currently working and planning to retire in the medium-to-long term future. That’s why it makes sense to undertake proper retirement planning, working with a specialist who understands the best ways to save for what could be an uncertain future for those working today, and in the future.