The cost of public sector pensions in Scotland Prepared for the Auditor General for Scotland and the Accounts Commission


Employers’ pension contributions have increased in line with underlying employment costs



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Employers’ pension contributions have increased in line with underlying employment costs

60. As noted in Part 1, employers and employees participating in each pension scheme must pay annual contributions to reflect the estimated long-term cost. For all five unfunded schemes, the employers’ contributions fall directly on the Scottish budget (within DEL).

61. Total employers’ contributions for the unfunded schemes increased by 15 per cent in real terms between 2005/06 and 2009/10, from £1,167 million to £1,388 million. Employees’ contributions increased by 16 per cent in real terms from £469 million to £544 million over the same period. This reflects general pay growth and higher employment in the Scottish public sector. Total public sector pay costs for the Scottish Government and Scottish local government grew by ten per cent in real terms between 2005/06 and 2008/09. Employment in the sector grew 3.3 per cent between 2005 and 2009, from 412,900 to 425,100 employees.

62. When considering the overall affordability of public sector pensions it is important to put the increase in payments and contribution rates into the context of the general increase in Scottish Government expenditure over recent years. Pension payments to retired employees have risen from 8.4 per cent to 9.2 per cent of the Scottish budget over the past five years while employers’ contributions for the three largest unfunded schemes fell from 3.7 per cent to 3.4 per cent. This is mainly because employers’ contribution rates have remained relatively stable in the NHS and teachers’ schemes. Therefore the changes in pensions spending have been driven by employee numbers and pay trends, which have been increasing in line with the general growth in public spending.




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