Outlook Here's one figure you did not hear in the Budget: £1.2 trillion. That's the value of the unfunded pension promises that have been made to past and present workers in the public sector according to analysis from Towers Watson.
This is real money future taxpayers (and contributors to public sector pension schemes) will have to find. And given that adding this figure to the national debt would roughly double it, you might wonder why more attention isn't paid to it.
The last time the Government estimated public sector pension liabilities was in March 2008, when it put the figure at £770bn. Towers Watson's updated data is based on some slightly different assumptions, but even if it used the Government's own accounting standards, the figure today would still be £993m.
This all relates to final salary pension schemes. Private sector workers, whose taxes will go towards meeting these liabilities, will note that these schemes are still open to new joiners. In contrast, most of their final salary plans have now been closed to new members. Some are being shut down altogether.
One reason for these closures is that companies now have to account for their pension scheme liabilities more openly and often. Shareholders want to know what they're doing about big deficits. The government, on the other hand, is not accountable in the same way.
This is not sustainable. Sooner or later, we are going to have to start talking about whether liabilities of this magnitude are sustainable – and whether private sector workers who no longer get such benefits should finance them for the public sector. The answer to both questions may be yes, but they must be asked.Reuse content