Government Pension Schemes Expenses to Double In the Near Future

Referring to the Office for Budget Responsibility (OBP), in the following 5 years the cost of public sector government pensions will double. The general cash injections will rise from £4 bln in 2010 to £9 bln in 2015. The reason for such changes is the number of civil servants drawing their pensions in the following 4 years and the increased longevity of pension holders.

Nick Clegg, LibDem Head, was quite negative about some government pensions having called them lacking and unaffordable. Moreover, he underlined that many private sector companies had to cease their final salary pension schemes, as the number of pension liabilities outweighed their real abilities. Here was the unfairness, because those private sector workers who henceforth would not get their final salary or defined benefit schemes should keep on paying taxes to provide the decent pensions to their public sector counterparts.

As a result of the recent stock market slump, final salary pensions or defined benefits pensions have become a ball and chain not only for the private sector, but also for the government.

The total idea of salary pensions is rather favourable and is regarded as the best pension plans, as they give a pension income calculated on salary and embrace your employee tenure. But it can be risky and expensive in conditions that the recent stock market slump brought, because the underlain investments are not fruitful. This led the majority of the private sector and the government as well to find ways to get out of the existing deficit.

There is now a strong wish to close final salary pensions and defined benefit pensions, because they cannot guarantee the pension income level.