By: Darwin Friend, head of research
Our latest research, mandarin millionaires, reveals the enormous pension pots of the UK’s 20 leading civil servants. These bureaucrats running UK government departments are sitting on a combined £21 million nest egg, with an average of £1.1 million per person.
Needless to say, these are pension pots that taxpayers, and particularly workers in the private sector, can only dream of.
And sitting at the top of this pile are two individuals who have seen their departments come under fire in recent years. Foreign Office boss Sir Phillip Barton, who was on holiday during the withdrawal from Afghanistan, has the largest pension pot of all, worth £2,016,000 in 2022-23. A short walk away at the Home Office, which let a record net 750,000 migrants into Britain last year and which has failed to deal with the problem of small boat crossings, Matthew Rycroft sits on £1.7 million.
For Rycroft this will mean an annual pension of £102,500 upon retirement. Barton will receive £92,500 with a lump sum of £237,500. Again, something that most taxpayers can only dream of.
Some may question the relevance of this. After all, £21 million is small change in the context of a government budget which runs around £1 trillion. And these are the UK’s leading civil servants.
But what these figures point to is a far deeper problem, which is the escalating costs of civil service pensions. Taxpayers find themselves footing the bill for a system that appears increasingly unsustainable and disconnected from economic realities. Earlier this year, it was revealed that, in 2020/21 the UK’s public sector pension liability exceeded 100 per cent of GDP for the first time, which means the amount the UK owes its public sector workers is larger than the size of the economy itself.
How on earth will we pay for this? Well, that’s precisely the problem. The government is one of the few employers remaining that hand out defined benefit pensions to workers, which guarantees a well-endowed continuous income throughout the entirety of retirement. These pensions are unfunded - there is no fund that bureaucrats pay into, which is put aside for them. It all comes from general taxation or borrowing. The private sector workers of today are paying for the cushy retirements of the bureaucrats of yesterday.
In contrast, most private sector workers are enrolled in defined contribution pension schemes, which invest their savings and are susceptible to fluctuations in the stock and bond markets.
On top of this, civil service pensions, as with the state pension, have seen dramatic increases linked to inflation and the cost of living crisis in recent years. Promises to increase civil services pensions in line with inflation led to the 10.1 per cent rise civil servants saw in April 2023, although the 6.7 per cent rise in April 2024 will be less than the state pension increase of 8.5 per cent.
Of course, that’s not where the perks in the public sector end. In 2023, median gross pay for public sector workers was around nine percent more on average than for private sector workers. Their pensions are more generous, their jobs are more secure, and they enjoy regular pay rises and promotions.
Every year, the government acknowledges the continuous problem of inefficiency and bloating within the civil service but fails to combat it directly; instead, they increase rewards. Taxpayers cannot continue providing perks for civil servants during and after their employment. A recalibration of the civil service pension system is not just a matter of fiscal responsibility; it's a question of fairness and accountability to the very taxpayers who make such pension packages possible.