Furthermore, the unfunded public sector pension liabilities are over 50% higher than the most recently published official estimate, which came in March 2002. The previous estimate put the present value of the liabilities in all the unfunded public sector pension schemes at £380 billion,according to Watson Wyatt LLP.
Watson Wyatt attributes to sudden increase in pension underfunding in the UK system tochanges in the way liabilities are calculated – bringing them more in line with the private sector – further accrual of benefits and improvements in mortality.
Going forward, Watson Wyatt says thecost of publicly funded pensions is rising by£30 billion a year, and increased life expectancy adds a further£30 billion.
“The pressure that has forced the private sector to account for pension costs in a transparent way is only slowly having an effect in the public sector,” Stephen Yeo, a senior consultant at Watson Wyatt. “Given the enormous size of the liabilities involved, it is vital that the true cost of all pensions is recognized.”