A new report by think-tank Intergenerational Foundation (IF) reveals that 78,000 public sector workers are on pensions higher than the average wage. The taxpayer's liability for public sector pensions now totals £1.2 trillion (£1,200,000,000,000).
IF argue the report shows the scale of the UK's "pension apartheid". According to freedom of information requests filed by the group, 88 per cent of public sector workers are currently entitled to pensions related to their final salaries, which are typically the most generous type of pension, compared to just 10 per cent of workers in the private sector.
The report calls for a phasing out of public sector final salary schemes, as well as more frequent and transparent publication of pension liabilities. It also points out the lack of awareness around the "unfunded" nature of public sector pensions – which are paid for with the contributions of current workers, rather than through ring-fenced savings – and argues that the system needs to change. It even suggests following the lead of Japan and considering an annual cap of 2 per cent of GDP.
Angus Hanton, IF's co-founder, said:
This is not a matter of party politics but a matter of rising longevity, a demographic bulge and successive governments’ continued assurances that public sector pensions are affordable, realistic and sustainable. Hutton clearly stated in 2011 that a crisis was on the way. It is here. Younger generations are facing unemployment of more than 1 million, having to pay through the nose for their education, and have little hope of affording homes of their own, yet somehow they will be expected to find £45k per household to fund these unaffordable pensions.
Ed Howker, IF's other co-founder and author of the report, added:
This paper shows that the pension prospects of public and private sectors workers are out of whack, and that future taxpayers face the difficult prospect of paying large public sector pension bills of a size and scale which is much larger that they are likely to receive themselves.