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In a report published on 6 April 2010, the Confederation of British Industry (CBI) says that pensions in the public sector must shift from unsustainable 'final salary' models to a more affordable system in order to contain a trillion pound burden on the taxpayer.
The research shows that such pensions include an unpredictable guarantee from employers and, as staff contributions are out of kilter with payout levels, the financial 'black hole' for unfunded public sector pensions is £10bn every year. The total overall liability for these schemes has grown to one trillion pounds, or £40,400 for every UK household.
The picture is complicated because public sector pensions vary greatly in size and structure depending on the employer. Some, such as the local government scheme, have more transparent arrangements and are 'funded', unlike, for example, the civil service, which is 'unfunded'. However, the findings seek to illustrate that the current approach to public sector retirement is simply not sustainable.
Public sector pension benefits are on average worth 26% of salary every year, which is far higher than private sector norms - and the total cost will increase as people live longer. To compound the situation, the state workforce has grown by almost 1million in the past decade to hit 6.1million, or one in five workers.
The CBI urges the next government to set up an independent commission within weeks of taking office to fully investigate the costs of pensions.
Getting a grip: the route to reform of public sector pensions (PDF)