Increase in UK public sector liability

A changeover to a market-consistent valuation of the police and fire services' pensions has added £15 billion to the UK government's liabilities, as part of a total £70 billion increase announced by the Treasury.

The method for calculating the liabilities of the police and fire service was changed in the financial year 2004/2005 from the reserve accounting framework to the market-consistent FRS 17 standard that is applied to private sector companies.

The change over to a discount rate pegged to the level of AA rated corporate bonds resulted in the real discount rate falling from 3.5% to 2.4%.

This was - according to Andrew Johnson, deputy actuary of the Government Actuary's Department - an example of how: "Small changes can have a big impact."

A bigger change than the move over to realistic balance sheet reporting was the restatement of interest payable, as pensions moved closer to payout over the financial year - a move that added another £44 billion to the total of liabilities.

A combination of the reassessment of poor quality data, increases in longevity assumptions and large pay increases in the health sector was responsible for the remainder of the increase.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Stemming the tide of rising FX settlement risk

As the trading of emerging markets currencies gathers pace and broader uncertainty sweeps across financial markets, CLS is exploring alternative services designed to mitigate settlement risk for the FX market

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here