We can today reveal that the true scale of the liability facing taxpayers for unfunded public sector pension schemes stands at an eye-watering £1.7 trillion. This dwarfs official estimates of £1.1 trillion, and these numbers are in addition to the official National Debt.
The official National Debt is around £1.2 trillion. But that doesn’t include liabilities for public sector pensions, which are kept off the books. Unlike private sector and local government pension plans, no funds are saved to meet the expected pension payments when they become due. The bill is simply left for future taxpayers to pay.
Politicians must urgently confront the enormous debt mountain that has built up thanks to overly-generous but completely unfunded public sector pensions, the campaign group says. Failure to give taxpayers a better deal will leave our children and grandchildren with a frightening bill to pay for today’s public sector staff.
The Government’s estimate of the size of this shortfall is also not calculated in the same way as the private sector must calculate its liabilities. Both the Government and the private sector reduce the expected payments in future years by a ‘discount rate’, to account for the fact that money held now to pay for a commitment in the future should grow.
But these discount rates are not the same. Instead of using the market discount rates, the Government uses a more generous rate determined by a committee.
Pensions liabilities and finance expert Neil Record has calculated that:
- The real liability for unfunded public sector pensions is £1.7 trillion
- That is £610 billion larger than the Government admits
- The real public sector pension liability has grown by over £1 trillion since 2003-04