UK - The cost of public sector pension liabilities is expected to soar to £1trn ($1.7trn), a pensions expert warns.
Ralfe said the government had no understanding of the true costs of pension provision and the real amount it should be setting aside for this year should be about £30bn.
He said the government had been using the wrong discount rate to calculate the true costs of the pensions that it is handing out to its employees today.
Ralfe claimed the government was using a high calculation of the Index Linked Gilt rate, far higher than the current real interest rate payable on government index-linked gilts.
On an FRS 17 calculation, he said the total public pension sector liabilities now stood at around £830bn.
He said: "Public sector bodies cannot be run efficiently if a major part of their costs are conveniently understated."
And although government had agreed to lower the discount rate for calculating the total net present value of future pension promises, it explained that in cash terms, its costs had not gone up.
Ralfe warned that the government would have to cut the benefits in its generous pension schemes if liabilities were to see any sign of improvement.
He added: "Most companies are also trying to limit their pension costs by reducing the terms of new pension promises, so they have an incentive to report real pension costs.
"The public sector smokescreen allows costs to be understated, which is convenient in negotiations."
Ralfe's revelations come as financial adviser Hargreaves Lansdown published radical analysis which that if the UK governments were to make no further unfunded pension promises to public sector workers, a child born today would still be paying for the existing liabilities until the age of 77.
The report likened the £1trn pension liability to a £1,000 credit card bill. In the past year, we have added another £29 of expenditure to the credit card but we have only paid off £21.
It said: "The big con is we are going to leave our children to pay off the £1,008 debt."
Hargreaves Lansdown pensions analyst Laith Khalaf added: ""Public sector workers undoubtedly deserve a decent pension, but the question that needs addressing is how it is to be paid for.
"Equally, private sector workers need to recognise that we are all living longer and that the rising cost of funding a decent retirement must be met by saving hard while still in employment."
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