The shortfall in public sector pension liabilities will be approximately £690bn in March 2005 – more than 60% higher than the most recent government estimate, according to consultancy Watson Wyatt.
The most recent official estimate put the value of as yet unfunded money owed to workers who have completed their service in the public sector at £425bn at 31 March 2003.
But Watson Wyatt said this was a significant underestimate because it assumed 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, the figure increases by more than 60 per cent, it said.
Stephen Yeo, a partner at Watson Wyatt, said: “Pension liabilities have been rising in both the public and private sectors. 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.”