The report found total payments to more than two million pensioners in the UK's four largest pay-as-you-go pension schemes (also known as unfunded schemes - where current employee and employer contributions are used to pay current pensions) were £19.3 billion in 2008-09, a real-terms increase of 38% since 1999-2000. This is driven by more employees retiring each year, which is a substantially more significant factor than longer life spans.
It also revealed employee contributions of £4.4 billion reduced the taxpayers' share of costs to £14.9 billion in 2008-09. The employee element grew by 56% in real terms since 1999-2000 because staff numbers and contribution rates have increased.
Amyas Morse, head of the National Audit Office, said: "My report today sets out clearly the facts surrounding current cash payments from the public service pay-as-you-go pension schemes and the basis for future projections of these payments. The Treasury has performed some analysis on the sensitivity of its projections to changing assumptions, but has not considered the potentially significant effects of changes in the size of the public- service workforce.
"Later this year I intend to report to Parliament on recent changes to the schemes, which are designed partly to reduce costs."
Commenting on the report, Bill McMillan, head of pensions at NHS Employers, said: "The report is an important contribution to the debate on the affordability of ‘pay-as-you-go' pension schemes of which the NHS pension scheme is the largest in the public sector. Employers will welcome the much-needed transparency and clarity it provides on the costs of public service pensions and their value to staff.
"The report looks at pension payments over the past 10 years. During this time the NHS pension scheme stands apart from the other three schemes studied by the NAO - those of the Armed Forces, Civil Service and teaching - as the only one that has paid more into the Exchequer than it has taken out. We believe the NHS pension scheme will continue to be sustainable and affordable going forward, buoyed by the changes made to the scheme in 2008 which made it sustainable in the future and ensured it continues to be fair to all."
"This major review and reform of the NHS pension scheme, implemented in 2008, will be examined in a forthcoming second NAO pensions report, which will also draw conclusions about the value for money of public-sector pension schemes."
The NHS pension scheme is currently undertaking the first four-yearly revaluation of the scheme since the recently introduced reforms. Although it is too early to say what changes will emerge from that process, the process of regular revaluation itself is an important part of the assurance to employers, taxpayers and government about the costs and value of the scheme.
The NAO will publish a second report later this year examining the impact of recent changes on the overall cost of the UK public service pay-as-you-go pension schemes.
