Here's a frightening figure. Every time longevity increases by a year, it costs BT's final-salary pension fund £1.3bn a year.
Now, as pension schemes go, BT's is a very big one. In fact, it's the largest private-sector final-salary pension scheme in Britain, but it is at least closed to new staff (and has been for several years).
So, as long as BT can agree a deal to plug the scheme's £9bn funding black hole that doesn't crush the company, the pressure will eventually ease. Unfortunately, that is not the case with the state. New employees joining the state sector still have access to the sort of copper-bottom pension schemes that have long been closed in much of the private sector. Schemes whose benefits ministers are allowed to get away with funding from the contributions of today's staff (topped up by taxpayers). There's no public-sector pensions regulator to order the Government to ensure that schemes are properly financed. Perish the thought.
If BT, with its closed scheme, has a serious problem with longevity, just imagine the problem the state faces, which still guarantees up to two-thirds of final salary to all its employees after they retire for life. This is the "elephant in the room" Ros Altmann and other pensions gurus have been banging on about for years.
Politicians, of course, are well aware of the problem. They have all seen the projections. And they have all come up with the same solution – which is to sit back and hope someone else sorts it out. Neither party has even engaged in much debate.
Nor has the Bank of England or the FSA. Or the other wise men charged with overseeing Britain's financial health. Because they know that if they do, they are likely to set off a firestorm. Better to sit back and hope that some miracle might come along and sort it all out for them. Maybe Harry Potter, who carries a wand and has the power to make everything better, will come to life, or perhaps they will even find a pot of gold at the end of the rainbow (scant chance of that after Gordon Brown sold half our gold off).
Meanwhile the liability just keeps growing. And growing. And growing. To such an extent that the requirement to fund public-sector pensions might eventually make today's public-sector borrowing requirement seem like a drop in the ocean.Reuse content