The pensions apartheid � can it continue? | 39
9
NHS pension scheme and new NHS pension scheme guides, April 2008, http://www.nhspa.gov.uk/nhspa_site/pdf/memberguides/sdguide.pdf,
http://www.nhspa.gov.uk/nhspa_site/pdf/memberguides/SDNG.pdf; Teachers pensions guide, September 2008,
http://www.teacherspensions.co.uk/resources/pdf/User%20Guide/TP%20Member%20User%20Guide.pdf; Civil service pensions,
http://www.civilservice-pensions.gov.uk/scheme_information.aspx; Office of the Leader of the House of Commons,
http://www.commonsleader.gov.uk/output/Page1626.asp
10
IFS Green Budget, January 2008, p.4.
11
HM Treasury, Long Term Public Finance Report 2008; Watson Wyatt press release, 8 March 2006
http://www.watsonwyatt.com/news/press.asp?ID=15784; Neil Record, `Sir Humphrey's Legacy: An Update', Institute of Economic Affairs, January 2008.
12
Office for National Statistics First Release, Public Sector Finances November 2008, 18 December 2008
Generous public sector pension arrangements are worth a
considerable salary premium. The IFS has calculated that they
add around 12 per cent to the salary of public sector employees,
compared with private sector employees. It concludes:
"Relatively generous public sector pensions mean that a public sector
worker is on average around 12 per cent better off than a private sector
worker on the same basic salary. This gap has grown over the past
decade as a result of private sector retrenchment. The Government has
made modest progress on reform, but unfunded public pension liabilities
continue to grow. The gap between public and private sectors does not
look sustainable. The case for further reform is strong." 10
THE COST OF PUBLIC
SECTOR PENSIONS
Most public sector pension schemes are not funded, and
therefore leave an enormous burden for taxpayers, now and in
the future. Estimates of total unfunded public sector pension
liabilities vary, but an ageing population and the Government's
failure to carry out thorough reform mean that all are alarmingly
high, ranging from �650bn to over �1 trillion.
Estimates of unfunded public sector pension liabilities11
Estimate Unfunded liabilities
Treasury
Watson Wyatt
Institute of Economic
Affairs
�650bn
�960bn
�1,071bn
46%
69%
77%
�26,000
�38,000
�43,000
TABLE 5
Total Percentage of
2007-08 GDP
Per household
These estimates suggest that public debt in the UK could be
over 100 per cent of GDP, which contrasts with the official
numbers putting it at around 45 per cent (including the finacial
sector interventions).12
Whichever estimate is used, the future bill to taxpayers will
be enormous. For example, over a 40-year time horizon it could
be up to �1,000 per household, per annum, or over an 80-year
horizon it could be up to �500 per household each year.

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