TAXPAYERS will face the bill for public sector pension deficits, the Centre for Policy Studies (CPS) said yesterday, eventually putting in £4 out of every £5 invested in the schemes.
Public sector pension shortfalls will hit £15.4bn in 2016-2017, according to Office for Budget Responsibility forecasts – 77 times higher than in 2005-06 when they totalled just £200m, the think-tank notes, a gap that taxpayers will eventually have to fill.
The annual burden on taxpayers will rise to over £32bn to fund these defined benefit schemes, the CPS predicts, equivalent to £1,230 for every household in the country – with those enjoying the schemes paying in only around a fifth of the total. CPS calls for a shift towards defined contribution schemes, in line the private sector, claiming the public see the current system as “unfair and unaffordable.”
Separate research showed that deficits in private firms’ defined benefits schemes were impacting on financial performance.
Some 57 per cent of firms surveyed by the Institute of Chartered Accountants in England and Wales (ICAEW) and Mercer said their defined benefit pension funds would negatively impact their business over the next three years, especially after quantitative easing (QE) helped to widen deficit gaps.
The ICAEW said defined benefit schemes are under “unprecedented pressure”.