The projected 50-year savings to come from raising the pension age to 65 for new entrants to public sector pension schemes have been wiped out in just a few months by falling interest rates, according to experts.
Analysis by consultancy Watson Wyatt shows that the figure on the UK government’s books for the accrued value of unfunded public sector pensions is likely to have increased by close to £60bn on 1 April 2005 owing to falling interest rates.
This compares with the projected saving of £13bn over 50 years from increasing the pension age for new entrants.
Stephen Yeo, senior consultant at Watson Wyatt, said: “Falling interest rates and increased longevity mean that the cost of pensions has risen.
“The long-term nature of pensions means that seemingly small changes in interest rates have a very large effect on accrued liabilities.
“The public sector has lagged behind the private sector in recognising these greater costs.”