Public sector pensions must be more affordable, says CBI

The 'final salary' scheme is unsustainable and is causing a trillion pound black hole burden on the taxpayer, the CBI claims.

Their research claims the financial 'black hole' for unfunded public sector pensions is £10bn every year. The total overall liability for these schemes has mushroomed to £1 trillion, 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 CBI believes that, taken as a whole, 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 1m in the past decade to hit 6.1m, or one in five workers.