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Public Sector: Pensions

Treasury written question – answered on 20th July 2011.

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Photo of Matthew Hancock Matthew Hancock Conservative, West Suffolk

To ask the Chancellor of the Exchequer what the cost to the public purse was of public sector pensions in each year since 1997.

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

Expenditure on unfunded central and local government pensions since 1997 has been published in the Public Expenditure Statistical Analysis. This covers expenditure in the central unfunded public service schemes, but not the locally administered police and firefighters' pension schemes or the funded Local Government Pension Scheme. This information is shown in nominal terms in the following table:

Expenditure (£ million)
2001 14,773
2002 16,518
2003 16,080
2004 16,377
2005 17,641
2006 19,080
2007 21,356
2008 22,525
2009 24,350
2010 25,875

PESA.2011 is available online at the following address:


Estimates of expenditure on a national accounts basis are also published by the Office for National Statistics in the Blue Book and by the Office for Budget Responsibility in the Economic and Fiscal Outlook.

Employer contributions paid into for the funded Local Government Pension Scheme in England since 1999 are presented in chapter 7 of the Local Government Financial Statistics England 2010. These are shown in nominal terms in the following table and the full document is available online at the following address:


Employer contributions (£ million)
1999-2000 2,273
2000-01 2,617
2001-02 2,916
2002-03 3,217
2003-04 3,544
2004-05 4,124
2005-06 4,626
2006-07 5,009
2007-08 5,400
2008-09 5,759

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Emma Goodall
Posted on 21 Jul 2011 12:51 pm (Report this annotation)

The question was "the cost to the public purse" which is fantastically complicated to calculate and this answer hardly begins to address the issue.

For instance, in the unfunded schemes, there seems to be no account made for the contributions to those schemes, only the amount paid out.

More significantly, by the state and public employers contributing towards these occupational pensions, the total benefit bill is reduced. This should be offset against the cost of the pensions, if we want a genuine idea of the overall cost to the public purse.

The average local government pension is £4052 (2009/10 average, according to the Public Service Pension Commission). Assuming that someone receiving this amount also receives a full state pension of £102.15 per week, our average pensioner would qualify for Housing Benefit of £30.85 per week and Council Tax Benefit of £9.49 per week. (I am a Housing Benefit assessor).

However, take away the local government pension and our average pensioner becomes entitled to full Housing and Council Tax Benefit, so the "public purse" would be paying their full rent and Council Tax. In addition, I am sure there would be an increased entitlement to Pension Credit (but that is not my area).

To only consider the employer contributions to these pensions when considering "cost" is exceptionally simplistic and (am I allowed to say?) wrong.

Emma Goodall
Posted on 22 Jul 2011 8:55 am (Report this annotation)

Oops! The figures I've given for HB and CTB are not the pensioner's benefit entitlement, but the weekly amounts s/he would be expected to contribute to their rent and Council Tax respectively (with HB and CTB picking up the rest). So these figures represent (usefully) the additional benefit which the state would have to pay if the pension was not paid, i.e. a total of £40.34 per week (not including any additional payments by way of Pension Credit).