The man who saved Boots' pension scheme has attacked "serious flawed" claims by the Government that the state will reap huge savings by cutting the pension benefits of teachers, nurses and civil servants.
John Ralfe, the independent pensions consultant whose work with Boots has been widely copied, says the current estimates of the savings understate the total cost by as much as £7bn.
The measures, which have created serious industrial unrest, are said by the highly regarded Pensions Policy Institute (PPI) to be capable of cutting the cost to the Government of public pensions from 23 per cent of a worker's salary to just 15 per cent.
The Public Sector Pensions Bill, currently working its way through the House of Commons, includes increasing workers' contributions from 6 per cent of salary to 9 per cent and raising the retirement age.
But Mr Ralfe, who has written to the PPI with his concerns today, said the rate of pensions people will earn will be higher after the Bill is passed, and this means any savings will ultimately evaporate. He calculates the "real" cost of public-sector pensions at 31 per cent of salary, and says this will barely change.
He added: "The 3 per cent increase in member contributions is a saving, and reduces the real cost to taxpayers from 25 per cent of salary to 22 per cent, a much smaller saving than the PPI calculates. Since the public-sector wage bill is over £100bn, the PPI understates the public-sector pension cost by a whopping £7bn a year."
At Boots, Mr Ralfe guided the retailer to quietly sell off the entire equity portion of its investment portfolio in favour of a portfolio of bonds carefully matched to the scheme's liabilities.
Such "de-risking" was at the time radical, but has since been followed in a variety of ways by several firms.