Public sector pensions cost twice as much to provide as previously thought and must be reformed if they are to be sustainable, a report has indicated.

Workers in the public sector would need to save more than 40% of their salary each year, including their employer’s contribution, to fund the final salary pension benefits they are building up.

But the actual amount they contribute is half this level at just 6% for workers and 14% for their employer, according to the independent Public Sector Pensions Commission.

A lack of transparency about the schemes is also masking their true cost due to the accounting methods used by the Government, it claimed.

The commission estimates that the schemes will cost the Government around ¬£18 billion during the coming financial year, using the Government’s own accounting methods, but it warned that this figure nearly doubled to ¬£35 billion if the liabilities were “properly measured”.

Unlike private sector final salary pensions, the public sector schemes are also unfunded, meaning that no pot of money has been set aside to pay future pensions, and as a result the liabilities of the schemes are estimated to be between £770 billion and £1.18 trillion.