The writer is an FT contributing editor At the last official reckoning in 2021, the value of UK public service pension scheme liabilities eclipsed 100 per cent of GDP. At the time, this was greater than the official estimate of the entire private sector pension system’s asset base. It was greater even than the stock of outstanding public debt. Since then, the scale of these liabilities against the benchmarks has receded thanks to higher bond yields and copious public debt issuance.
Diverting all of these towards productive finance would leave the Treasury with a not insubstantial funding hole. National accounts would see both debt-to-GDP and direct interest costs rise. Yet diverting even a portion of them would probably deliver substantial fiscal savings. While on-balance sheet debt would rise, off-balance sheet liabilities would fall. And the cost of these off-balance sheet liabilities is substantial.