The latest figures detailing pension liabilities in the UK are potentially misleading and contain a number of omissions, according to Saga.Last week (April 27th), the Office for National Statistics (ONS) published a report which showed how much is owed to current pensioners and workers when they eventually retire.
Overall, these liabilities are estimated to have reached £7.1 trillion, with £2.1 trillion set to be met by private sector firms and pension funds and the government liable for the remaining £5 trillion.Saga welcomed the study as it represented the first attempt from the government to show total pension obligations.However, the group was critical of the fact that the figures only relate to pension liabilities accrued up to the end of 2010 and therefore fail to include future pension liabilities. Dr Ros Altmann, director general of Saga, said: "Given that public sector pension schemes are going to continue - the government has promised that these workers will retain defined benefit pensions in the long-run - these future costs will continue to rise sharply."The European Central Bank has rightly said that future liabilities really need to be included, if we are to have a proper picture of what pension liabilities will be over time."Dr Altman added that the inclusion of defined contribution schemes as pension obligations is "strange" and potentially "misleading". This is because the figures for these schemes only relate to their assets, with no information given on what actual 'pension' will be delivered over time.It would be preferable to measure defined contribution pension obligations as annuities in payment or future annuitised income, she suggested.Saga also claimed the figures were understated as the discount rate used to calculate the total pension liabilities (five per cent) was too high.The discount rate is used to take into account yields from pension investments but Saga has warned that this is two per cent above actual levels – meaning actual pension liabilities could be nearly a third higher than shown.
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