Public sector pensions liabilities put at 80% more than government estimates

Britain’s unfunded public sector pension liabilities will be about £960bn in March 2006, according to consultancy Watson Wyatt.

This is more than 80% higher than the most recent government estimate and amounts to £40,000 per household in the UK.

Stephen Yeo, a senior consultant at Watson Wyatt, said the government was “taking a rosy view of the cost of public sector pensions”.

“The most recent official estimate put the present value of the accrued liabilities in all unfunded public sector pension schemes at £530bn at March 2005,” he said. “This is a significant underestimate because it doesn’t take account of falls in long-term interest rates that have pushed up the cost of pensions.

“Once account is taken of current interest rates, a year’s extra pension and improving longevity, this figure increases by over 80% to £960bn,” he said.

“If the private sector was allowed to use public sector methods to value their own pension liabilities, the £78bn deficit for the companies in the FTSE 350 index would be completely wiped out.”

The most recent government estimate of the accrued unfunded public sector pension liability was £530bn in March 2005 by the Treasury.

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