The Treasury said NHS pension liabilities alone had climbed above £1 trillion, while the cost of future pension promises to millions of public sector workers including doctors, civil servants and teachers ballooned by £333bn to reach £2.64 trillion in the 2021-22 financial year.
The jump in liabilities was driven by a substantial downgrade to Britain’s growth prospects, which raises the predicted cost of funding gold-plated final salary or career average schemes that offer a guaranteed income on retirement.
Sir Steve Webb, a former pensions minister, described the £2.6 trillion figure as “eye-watering” and larger than the size of Britain’s economy.
He said: “If the economy is growing more sluggishly, then the future wealth of the nation is going to be smaller than you thought. So it’s going to be more painful to pay these promises.”
While millions of public sector workers still benefit from gold-plated final salary pensions, most who work in the private sector rely on defined contribution (DC) schemes that link pension payouts to the performance of financial markets.