Public sector pension payments hit record £56billion as system labelled 'unsustainable'

Treasury figures show taxpayer-funded public sector pension payments reached a record £56billion during the 2025-26 financial year

Public sector pension payments reached a record £56billion during the 2025-26 financial year, placing a substantial burden on British taxpayers.

The annual cost has effectively doubled over the past 14 years, rising from £27.8billion in 2011-12 to £56billion in 2025-26, Treasury figures released today show.

For households across Britain, the expenditure equates to around £2,000 per home, based on the country's 29 million households.

The cost is also expected to continue rising, with projections indicating the bill will increase by a further £2.6billion during the current tax year.

Most recipients spent their working lives in the NHS, schools, the Civil Service or the Armed Forces.

Payments increased by more than £1billion compared with the previous financial year alone.

Baroness Neville-Rolfe, a former minister who has long called for changes to public sector pensions, said the current arrangements required urgent review.

She said: "I have campaigned for a review of public sector pensions because they are unfunded and unsustainable."

The Conservative peer, who successfully introduced an amendment requiring the Government to examine the affordability of public sector pensions next year, said the long-term liabilities posed a significant fiscal challenge.

Baroness Neville-Rolfe added: "There are no savings to pay for the long-term liabilities which represent a second national debt as much as 74 per cent of GDP on some external estimates."

Her comments come as ministers face increasing pressure to address concerns raised by critics over the long-term affordability of public sector pension commitments.

Maxwell Marlow, director of public affairs at the Adam Smith Institute, said the gap between public and private sector retirement provision had widened significantly.

Mr Marlow said: "Public sector pensions have skyrocketed above those of the private sector. Their private sector counterparts will see this and be green with envy."

He argued that public sector workers should move to defined contribution pension schemes, bringing them into line with arrangements commonly used across the private sector.

Mr Marlow added: "The public sector should adopt a defined contribution scheme model for public sector pensions, especially since these funds are putting increased pressure on households."

He warned: "The failure to do so will mean higher taxes and lower living standards for us all."

Freedom of Information requests revealed that 71,155 retired public sector workers received annual pensions worth more than £50,000 during the 2025-26 financial year.

Nearly 4,000 pensioners received annual payments exceeding £100,000, while 23 former civil servants collected pensions worth more than £150,000 each year.

Taxpayer-funded employer contributions have also increased significantly to meet the cost of pension commitments.

Schools now contribute 28.6 per cent towards staff pensions, up from 16.5 per cent in 2019.

NHS employer contributions have risen from 14.4 per cent to 23.8 per cent over the same period.

Employer contributions stand at 29 per cent for civil servants and 73.5 per cent for Armed Forces personnel.

Total employer contributions reached around £46billion during the last financial year.

Neil Record, a pension expert and former Bank of England economist, estimates Britain's overall public sector pension liability now stands at £5.8trillion and continues to increase.