UK - Contributions paid to public sector pension schemes over the next five years are forecast to be £30bn (€37.4bn) lower than the value of benefits built up, figures from HM Treasury have revealed.

The Public Expenditure Statistical Analyses (PESA) for 2008 showed for the financial year 2007/08 the increase in pension liabilities in the unfunded public sector pension schemes was £29bn, while the estimated contributions were just £19bn.

In addition, the report predicts future increases in liabilities of £25.4m for 2008/09, £26.2m in 2009/10 and £27.2m in 2010/11 which, compared to the contributions the government expects to receive, results in a shortfall of £29.9m.

These latest figures relate to the unfunded public sector schemes - which excludes schemes including the police and fire-fighters and the local government pension schemes (LGPS) - so although there is no actual pot of assets, Watson Wyatt said the government calculates contributions to many schemes as though they were funded, with contributions assumed to earn a notional return each year until the benefits are paid.

However, Watson Wyatt suggested the large increase in liabilities for 2007/08 could be attributed to a lower discount rate for that year of 1.8% above inflation, while the slightly lower increase of  £25.4bn for 2008/09 - which is more than three times as much as HM Treasury expects to raise from the abolishment of the 10p tax band - is the result of a higher discount rate of 2.5%. 

John Ball, head of UK defined benefit consulting at Watson Wyatt, said: "One of the attractions of public sector pensions to employees is that they are guaranteed, and this security comes at a price."

The opposition Conservative party suggested the figures, which reveal public sector benefit costs for 2008/09 are the equivalent of £1,000 for every household in the UK, were "slipped out in obscure Treasury documents".

Phillip Hammond, Conservative shadow chief secretary to the Treasury, said: "Public sector workers do important jobs, often under difficult circumstances, and they are entitled to security in retirement."

"But it's high time Gordon Brown came clean about the true cost of public sector pensions. This lack of transparency is just building up yet more problems for the future," he added.

The latest figures follow a report in January by a former Bank of England economist, Neil Record, which suggested the true figure for UK public sector pensions had reached £1.1trn, well above the government's estimate at the time of £835bn. (See earlier IPE story: UK "hiding" £1.1trn true cost of unfunded liabilities)

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