UK public pensions liability now €1.5trn – report
UK - The UK's public pensions liability has been put at more than £1trn (€1.5trn) by a new study, according to a report in the Times.
The paper said the study by Record Currency Management's Neil Record for the Institute for Economic Affairs puts the liability at £1.025trn, or the equivalent to 80% of gross domestic product and more than double the size of the national debt.
The figure is double the £530bn claimed by the Treasury and higher than the IEA's £817bn estimate last year, the paper said.
In March consulting firm Watson Wyatt also put the liabilities at some £1trn, saying the government had underestimated unfunded public sector liabilities by more than 80%.
Record, a former Bank of England economist, was quoted as saying the liability had risen because long-term real interest rates were exceptionally low.
And the report stated that the government was using too high a discount rate, enabling the Treasury to undercharge state employers for their pension contributions.
The Times quoted a Treasury spokesman as saying: "Following international best practice, the government uses the same accounting standards to calculate the public sector pensions liability as private sector pension funds. However, what matters is the annual cash requirement to pay pensions benefits, which remains fully affordable."
Record has written a book on the topic, ‘Sir Humphrey's Legacy - Facing up to the cost of public sector pensions'. Sir Humphrey was the top bureaucrat in the TV series ‘Yes, Minister'.