What Is the Truth Behind the Unfunded Pension Liability Debate the Pension Future Forum Has Emphasized? (Part 3)

A UK House of Commons Treasury report likewise sets out the magnitude of the "net public sector pension liability." Because the United Kingdom operates on a pay-as-you-go (PAYG) basis, it uses a discount rate rather than an investment return rate to measure the present value of its liabilities; when interest rates surged in 2022 (the UK LDI crisis), long-term rates—and hence the discount rate—rose, and the book value of the liability recorded for 2023 appears to have fallen accordingly. The document itself notes that "fluctuations in the discount rate distort changes in the liability." Should market interest rates stabilize, the figure may decline further.