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Comment from BAPA by  Brian Havard on the 2006 Government Actuary’s report

That the UK excuse of ‘unaffordability’ for not paying annual uprating of our state ‘pensions was contrived, is borne out by the UK Government Actuary, Christopher Daykin’s report on the Social Security Benefits Uprating Order 2006 just published, an extract of which is shown below.

The estimated total for Basic Pension in the fiscal year 2006/7 is £44,568 millions; the cost of uprating pensions of half the expatriates – the 480,000 who are frozen (240,000 in Australia) - is said to be £400 millions, thus  under 1%. Interestingly, Daykin reports a forecasting error of £466 millions in contributions and of £427 millions in payments, proving our contention that the cost of uprating the final 4% of pensioners is within forecasting error in the Pensions Budget.

But the most significant confirmation is of the growing balance in the National Insurance Fund, over £60 Billion predicted for 2010/11. The Government Actuary requires that there be a ‘prudent’ balance of one-sixth (16.7%) of benefit payments, the rest of the balance being surplus. The actual balance for the fiscal year 2006/7 will be 60.1% rising in 2010/11 to 79.5%! This means that the annual growth in the surplus is about ten times what would be needed to index our pensions.