Public sector pay rows always focus on the headline number, as if the payslip tells the whole story. It doesn’t. The real cost of these jobs lives inside the pension promise, and that is the one part of the package nobody in government wants to discuss. Neil Record’s latest estimate puts the value of unfunded public sector pension liabilities at around £5.4 trillion. Spread across the country, that is roughly £190,000 per household. The Treasury prefers to quote the discounted Whole of Government Accounts number of £1.3 trillion, but discounting doesn’t make the promises smaller — it just makes the spreadsheet look cleaner.
The gap this creates between public and private workers is now impossible to ignore. Take two people on the same salary doing the same job: one in the private sector, one in the public sector. The private worker typically receives an employer pension contribution of around 3 per cent. The public sector worker, on the other hand, receives a pension promise worth the equivalent of 20 to 30 per cent of salary, depending on the scheme. The difference is extraordinary.
On a salary of £40,000, a private sector worker might see a total of just over £3,000 a year going into their pension when you combine their own contribution and their employer’s. The public sector worker on the same salary receives a pension promise worth between £10,800 and £14,800. In other words, they are getting the equivalent of a 19 to 29 per cent hidden pay uplift every year, invisible to the public debate.
Scale it up and the effect becomes even more striking. At £75,000 a year, the private worker might receive £6,000 of pension value. The public sector worker on the same salary receives between £23,250 and £29,250. The difference — £17,000 to £23,000 more every single year — is effectively a 23 to 31 per cent uplift that never appears in the headlines. It is a structural advantage the private sector abandoned long ago because it simply became unaffordable.
The best analogy is this: if the private sector worker is riding a basic supermarket bicycle, the public sector worker is given an electric bike with free servicing for life and unlimited batteries. The twist is that the taxpayer riding the supermarket bike is the one funding the electric one.
Given this, the real question is why the government’s negotiating teams continue to ignore pensions when dealing with groups such as junior doctors. Every time the government grants a pay rise, it automatically locks in decades of additional pension liabilities, yet this is never acknowledged in the room. A one-off cash increase today becomes a long-term cost that compounds across millions of workers. When liabilities already stand at £5.4 trillion, pretending that only the headline “pay rise” matters is absurd.
If ministers had to admit publicly that every pay award feeds a pension system the country can no longer afford, the entire negotiation would look different. But because the bill does not fall due until long after the negotiators have moved on, honesty is optional.
We are not short of data. We are short of the willingness to face it.
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