So, that’s 100% of GDP on the national debt then

The bill for public sector pensions has soared by 30% over the past year to more than £1.8 trillion — almost equal to the annual output of the entire economy.

The surge has been caused by the drop in bond yields since the EU referendum — lower returns on government bonds increase the cost of future pensions, as expressed in today’s money.

So, shouldn’t we be raising interest rates then?

7 thoughts on “So, that’s 100% of GDP on the national debt then”

  1. Shouldn’t you subtract the LGPS? It’s a funded scheme and, apparently, doesn’t have a crown guarantee. On the other hand, maybe you should add the BT scheme, since, tho’ funded, it does have a crown guarantee. Wot abaht the Post Office? Dunno.

  2. Anyway, at some point the serfs may take their revenge and halve the pensions of the civil servants and schoolteachers and MPs.

    Not the nurses, of course, for they are angels, are they not?

  3. They should not simply rate base rates but they should stop buying gilts and corporate bonds until the discount rate rises to the extent that the value of a private sector pension (annuity rate<3%) is the same as that calculated for public sector pensions (c5%).

  4. Somebody wiser than me once said “If something can’t go on for ever, it won’t” (or words to that effect).

    What will happen when – not if – the government defaults on these pensions? The welfare state is also a Ponzi scheme, so what happens when that goes tits up as well?

  5. I’ve not been in the game for 20 years, but if I were an actuary valuing liabilities 20 years in the future, I’d find it hard to justify using the extremely low rates that obtain at present. Surely they’re unlikely to continue for decades?

    I confess that I’d find it very difficult to decide what rate should actually be used!

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