£1,000bn cost of retired State workers – that's £43,000 for every family - News

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The public sector pension liability is £1,000billion - much higher than ministers have admitted, researchers claimed yesterday.

A report from a Right-wing think-tank found that the Government is using an artificial interest rate which massively underestimates the true cost.

Public sector pension schemes - paid for by taxpayers - are far more generous than those offered by the majority of businesses.

This means that private sector workers pay almost as much into "gold-plated" public sector pension schemes as they do into their own.

Through taxes, they contribute 91p towards the retirement of public sector employees for every £1 they invest themselves.

The Institute of Economic Affairs claimed on Tuesday that Britons will have to cope with lower public spending and a possible economic downturn because of the mounting public sector pensions burden.

Officially, the Government has pension liabilities of £835billion - but Neil Record of the think-tank said that a more realistic estimate would be £1,071billion. This works out at £43,000 for every family in the country.

He said this will increase the Government deficit to 5.4 per cent of gross domestic product - more than twice the official estimate.

"This is a very real call on future taxpayers that is not properly revealed to or understood by taxpayers."

Mr Record said the Bank of England had recently changed its accounting procedures to correctly estimate its level of pensions liability - but the Government had not followed suit.

"Exactly the same principles should be applied to all public sector employers so the cost of providing pensions is fully understood," he added.

The rise in the cost of pensions has been particularly steep in the NHS, where doctors have received massive pay rises in recent years.

GPs now earn £110,000 a year - 55 per cent more than they did three years ago.

Ros Altmann of the Pensions Action Group said: "Pensions are the biggest problem the public sector has and the Government has not even recognised it exists.

"This can only get worse. The Government has been hugely irresponsible with our money."