The cost of meeting pension commitments for civil servants, teachers, National Health Service employees and the emergency services has risen so quickly that it now dwarfs the level of public sector debt.
Using principles based on private sector accounting rules, the actuarial consultants Watson Wyatt estimate that unfunded public sector pension liabilities will reach £690bn in March - more than one-and-a-half times the £417bn level of net public sector debt.
The figures - which represent the amount the government would have to borrow today if it wanted to create a fund able to pay for the pension rights already accumulated by three million public sector workers - will strengthen ministers' determination to reduce the generosity of future public sector pensions. It comes despite strike threats bypublic sector trades unions, who will on Friday stage a "day of action".
Stephen Yeo, a partner at Watson Wyatt, underlined the depth of the government's problems by pointing out thateven if ministers succeeded in their aims the £690bn liabilitywould remain.
"The government's proposals only affect the future cost of pensions, not the cost of pension rights already built up," he said.
Public sector workers have disproportionately generous pensions compared with private sector employees on similar wages.
The 3m employees with unfunded pensions represent just over 10 per cent of the workforce, but the Pensions Commission estimated that they had built up 29 per cent of the accrued pension rights in the UK.
If the additional liability was added to the national debt, it would amount to more than 90 per cent of gross domestic product, not the 34.9 per cent recorded by the Office for National Statistics.
The most recent official estimate of public sector pension liability, produced by the Government Actuaries Department, stood at £425bn in March 2003.
Watson Wyatt calculated its estimate by updating the government's figures to 2005, adjusting them for increased life expectancy and the effect of falling interest rates.
Bringing the calculation up to date added £85bn to the liability, a result of interest charges and increased liabilities for the health service pension - in part because of rapidly rising staff numbers.
Taking account of the most recent information on the increase in life expectancy raised the figure by a further £30bn. The remaining £150bn reflected lower long-term interest rates, which adversely affect both private company and government pension liabilities.
Lower rates mean the government would have to borrow more now in order to be sure of being able to pay public sector pensions in the future. The annual cost of paying unfunded public sector pensions currently stands at £16bn, but will rise quickly up to 2020 as a wave of public sector workers start to retire.
Unions on Thursday stood firm on their demand that public sector pension rights must not be watered down. Amicus, one of Britain's biggest trades unions, said that new public sector employees "would face average pension losses of between 25 per cent and 27 per cent, with local authority employees worst affected" as a result of government plans to raise their retirement age from 60 to 65.
Pensions for local government employees are funded and the rising costs have already placed serious strains on council tax levels in recent years.
Public sector unions are also balloting members for a possible one day strike on March 23.
