The cost of public service pensions is forecast to grow by £3bn between 2020 and 2022, Budget documents have revealed.

According to the Autumn Budget supporting documents, the net public service pension payments expenditure for the Treasury is expected to rise by £3bn from £13.6bn in 2020 to 2021, to £16.6bn in 2022 to 2023.

While the £3bn figure may sound like a considerable uplift, it is only an additional top-up in the grand scheme of public sector pension costs and payments, Royal London director of policy Steve Webb told Pensions Age.

The key is that public service pensions are unfunded in the UK, Webb explained, and as a result, yearly contributions paid into the scheme are then used to fund the income of pensioners each year.

The cost increase is largely “indicative of an ageing population” the former Pensions Minister noted. Consequently, the forecasted sums detailed in the Budget are predictions based on the increasing number of pensioners, (who are living for longer,) compared to a less rapidly rising number of public service staff. With growing numbers of pensioners, a government top-up is likely to be required to make up full pension payments.

In a tweet, Webb added: “This [£3bn] is the Treasury top-up over what public sector employers pay. £3bn not very large in that context, but means schools/hospitals not having to fund all of increasing pension costs.”

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