So-called Debt Crisis

HAMISH_MCTAVISH

Generali wrote: »

No, the chart shows what might have happened from a particular point in time given a set of assumptions some of which were quite optimistic.

Either way, it hardly seems unsustainable to be paying between 1.5% and 2% of GDP each year on these "unfunded" pensions.

HAMISH_MCTAVISH

Bumped for relevance to recent debates.....

chewmylegoff

Generali wrote: »

£5 trillion, even when spread over 5 decades is a hundred billion a year;)

The assumptions in the small print below your graph assume that real GDP grows at 2.5% a year. Growth has averaged about 1.4% over the past decade according to my rather rough and ready calculation so that's a big ask.

As an aside I find it very interesting that despite an aging population that is living longer and has huge pensions promised to it, the Hutton Report manages to show annual pension costs (as a proportion of GDP) falling pretty much year-on-year from a few years time. That's good if it can be done but I have my doubts

It's because the chart is showing liabilities for the pensions of public sector employees - not total pension liabilities including the state pension which are much larger. State pension payments are already about 5% of GDP per annum.

As for the public sector pension costs falling as a % of GDP that is presumably a combination of optimistic growth forecasts and reducing membership of public sector pension schemes (due to e.g. Large scale outsourcing by councils).

chewmylegoff

HAMISH_MCTAVISH wrote: »

Either way, it hardly seems unsustainable to be paying between 1.5% and 2% of GDP each year on these "unfunded" pensions.

This reckons we're currently spending nearly £140bn per annum on pensions although I'm suspicious about exactly what is in that number as I believe that the basic state pension is currently costing about £70-80bn, so presumably the £140bn is all payments to pensioners including e.g. Pension Credit and DLA etc. £140bn is as I am sure you're aware, close to 10% of GDP.

chewmylegoff

http://www.economicshelp.org/blog/142/economics/what-does-the-government-spend-its-money-on/

PaulF81

It needs cutting. Pensioners didn't pay enough and they are now living too long to boot.

BobQ

Generali wrote: »

£
As an aside I find it very interesting that despite an aging population that is living longer and has huge pensions promised to it, the Hutton Report manages to show annual pension costs (as a proportion of GDP) falling pretty much year-on-year from a few years time. That's good if it can be done but I have my doubts

This is the impact of changing from RPI to CPI and closing the final salary schemes and replacing with career average pensions plus the contribution increases. Surely this must have some impact?

wotsthat

Generali wrote: »

£5 trillion, even when spread over 5 decades is a hundred billion a year;)

It's enormous but you can be sure that in 5 decades time the politicians of the day won't feel obliged to meet the promises that other politicians made decades previously.