The UK government’s liability for public sector pensions has grown to £690,000,000,000 — more than the national debt, say actuaries Watson Wyatt. This is over 60 per cent higher than the most recent Government estimate.
“Pension liabilities have been rising in both the public and private sectors,” says Stephen Yeo, a partner at Watson Wyatt. “Companies now have to account for their pension liabilities on their balance sheets in a transparent way. Given the enormous size of public sector pension liabilities it is vital that they too are properly accounted for. The most recent official estimate put the present value of the liabilities in all the unfunded public sector pension schemes at £425 billion at 31 March 2003. This is a significant underestimate because it assumes that very high rates of interest can be earned. Once account is taken of current low expected real returns, two years further accrual and improving mortality, this figure increases by over 60 per cent to £690 billion.”
The bulk of the liability for unfunded pension schemes relates to four large schemes: Teachers, NHS, Civil Service and Armed Forces. In 2003 these accounted for 78 per cent of the total estimated liability. Smaller schemes exist for police, the fire service, various Scottish bodies and other groups. The Local Government Pension Scheme is funded and is excluded from the figures.