Starting point:

• Unfunded pension liability: £1,400.9bn
• Unfunded pension benefits paid: £60.4bn/year
• Unfunded current-service cost: £23.8bn/year
• Reform starts: 2027
  
• Existing accrued rights protected
• Future accrual reduced by 20%, 30% or 40%
• Transition from old to new accrual assumed to take 20 years, reaching full effect in 2047.
• All figures below are 2026/2025-money equivalents, rather than future inflated pounds.

The official WGA confirms the £1,400.9bn liability and £60.4bn benefits-paid figures.

These are real annual savings - i.e. what those amounts represent in today's purchasing power.

So, in real terms, our illustrative 40% scenario produces about £495bn of cumulative cash expenditure reduction between 2027 and 2057.

Again, that is not £495bn of money available to spend immediately. It is the sum of annual reductions in pension payments over the 30-year period.

This is where inflation can be misleading.

If we assume 2% annual inflation, the £24.2bn real saving in 2047 would correspond to approximately:

£24.2bn × 1.02²⁰ ≈ £36.0bn nominal

And by 2057:

£24.2bn × 1.02³⁰ ≈ £43.9bn nominal

But those aren't additional savings. They are simply the same purchasing power expressed in future pounds.

So:

For comparing the economic effect, the £12.1bn/£24.2bn real figures are the more useful numbers.

Here inflation adjustment actually makes the analysis clearer.

The WGA's £1,400.9bn is already a discounted present-value figure. HMT says the underlying future pension payments include assumptions for price inflation, salary growth and pension increases.

Our earlier assumption was:

70% existing accrued rights + 30% future service.

Therefore:

These are today's-value figures. We don't need to inflate them.

The £60.4bn of annual pension payments shouldn't really be held constant forever.

If we're going to make this model genuinely useful, we should allow for:

inflation + public-sector wage growth + changes in the number of pensioners + longevity.

The WGA itself identifies salary growth, pension increases and life expectancy as major drivers of the liability. For example, HMT estimates that increasing assumed life expectancy by one year raises the unfunded liability by about 3%, or £42bn.

That means our £60.4bn baseline is deliberately conservative in one respect: we're saying:

'What if the pension system's real expenditure stayed roughly at today's level, and reform simply reduced the proportion attributable to the new accrual?'

It is useful for understanding the reform, but it isn't yet a full demographic forecast.

More realistic by introducing three unlikely variables:

• Inflation: 2% p.a., used only to convert future nominal amounts back into today's pounds.
• Real public-sector pay growth: perhaps 1% p.a., because future pension accrual is linked to earnings.
• Pensioner/cohort replacement: progressively replacing people with pre-2027 service with people whose entire careers are under the new accrual rate.

Answer a more consequential question:

By 2037, 2047 and 2057, how much of the £60bn+ annual public-sector pension bill would actually have disappeared under a 20%, 30% or 40% future-accrual reduction?

Would that be a better estimate of the real government cash saving, rather than simply applying an assumed percentage to today's pension bill.