Labour lashed on pensions black hole

THE Government cannot afford to keep its generous public sector pension schemes, according to a former Bank of England economist.

Neil Record, who is now an investment manager, said Whitehall pension funds have a £470bn black hole, almost £100bn worse than the Government's own estimate.

The disparity is because the Government does not use market rates to value its liabilities. Record said: 'We cannot afford to continue with these public sector schemes. The cost of an index-linked, generous Government pension is enormous.'

Instead of funding lavish pensions, he said the Government should pay nurses, teachers and other public servants more money, and allow them to make their own decisions.

'At the moment they struggle on relatively low pay, but they are all retiring on wonderful pensions, completely immune from economic reality. I don't want to do down nurses or teachers, just to give them choices.'

Fears have been mounting for some time that the UK will become a divided nation in retirement, with private sector workers living on diminished incomes while public servants enjoy a secure old age, funded by taxpayers.

The £470bn public sector pensions deficit is bigger than the national debt, which stood at £435bn at end-2002. The shortfall, which could cost taxpayers £21bn a year to fund, dwarfs the private sector deficit, estimated at £100bn for FTSE 100 companies.