“Reform’s plan for public sector pension is economically incoherent and would end up costing taxpayers tens of billions of pounds in the years to come, blowing a gaping hole in all of their spending promises, and casting doubt on their ability to honour their pledge on the triple lock.
“Public servants are not punchbags for Reform politicians, and their pension pots are not piggybanks that can be raided. This is yet another example of Reform’s war on working people, with people’s pensions and rights at work at risk from their anti-worker policy agenda.
“The Office for Budget Responsibility has been clear that public sector pensions are not a risk to our fiscal sustainability, the real risk would be a Reform government with no understanding of how the public finances work.”
Public sector DB schemes are unfunded. That means today’s contributions pay for today’s pensions. The full cost of paying for current pensions is carried on the Treasury’s balance sheet. Even if a new DC scheme is introduced. those payments will be made.
Member contributions as well as employer contributions to public sector DB schemes go straight into the Treasury pot and register on the balance sheet. Moving to DC would mean a loss to the Treasury of all those member contributions.
Under a DC scheme, payments today pay for the pension which will be ultimately drawn in future. These payments must also be costed by the OBR. So the public finances would be paying for all of: DB pension payouts, DB member contributions, DC employer contributions.
This represents an additional cost to the public finances of: Current DB member contributions plus DC employer contributions.
- Ballpark average of public sector DB scheme member contribution rate – 8% = £14bn annually
- DC employer contributions based on reasonable private sector comparator – 10% = £18bn
- DC employer contributions based on median private sector rate (we take this as the floor) – 4% = £7bn
- Total increased cost to public purse: £22-£32bn annually
- Reform plan to transition people onto a new pension system. Assuming that 20% of public servants transition in the first time, that would result in a fiscal hole of between £4.4 -£6.4bn by the end of their first term, with costs continuing to rise every year after that.
(All stats use total central government pay bill in RDEL (Source: HMT PESA, Table 2.1) of £198.538bn in 2025-26 and assume this includes approximate average unpensionable employer NICs of around 10%)
In November 2025 Prospect wrote to Richard Tice explaining the problems with the policy
Cost of current DB schemes as a percentage of
The latest OBR long-term projections are from 2024.
| |
2023-24 |
2028-29 |
2033-34 |
2043-44 |
2053-54 |
2063-64 |
2073-74 |
| Cost as a %age of GDP |
1.9 |
1.9 |
1.8 |
1.5 |
1.4 |
1.4 |
1.4 |
They are available from: CP 1142 – Office for Budget Responsibility Fiscal risks and sustainability
Table 4.3 – ‘public service pensions’ figures.
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