Sharp hike in public sector pensions liability

The government’s public sector pensions liability has risen to a record £81bn, up from £24bn last year, new Treasury figures reveal.

The figure emerged in the wake of a Treasury revision of its methods of calculating public sector pension costs to reflect more closely those used in the private sector.

The increases, revealed in the government’s Spring Supplementary Estimates, were caused by a change in the ‘discount rate’ used to calculate how fast interest rates will erode the pensions bill. Previously a discount rate of 3.5% had been used: that has been cut to 2.8%.

Government data suggests that the total present value of the liability to buy pensions for public sector workers in future is £540bn, but the fresh figures support independent forecasts of up to £800bn.

The Treasury said: “These figures do not represent the official measure of public sector pensions liabilities. Actual cash payments due are not affected by actuarial and accounting changes to discount rates.”

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