The Liberal Democrats are mining a rich populist seam in drawing attention to the widening pensions gap between public and private sector workers. For every £1 that private sector workers put in to their pension schemes, they pay 91p in tax to finance public sector pensions, the LibDem researchers say.

Even this figure understates the true burden, because most public sector pension funds are unfunded. The Government is entirely relying on future taxation to pay for past pension promises. Take this into account and the public sector pension liability is more like £2.99 for every £1 of private sector pension saving, according to actuaries Watson Wyatt.

Resentment over the two-tier pension system is only going to grow among the four fifths of the workforce in private employment. With every closure of another final salary scheme in the private sector, the disparity widens. With every medical breakthrough that raises longevity, the present-day value of the defined-benefit promises, which are still the norm in the public sector, mushrooms. The pension liabilities of teachers alone have ballooned by £38 billion in the space of one year by one measure.

The sense of unfairness is most acute among a younger generation who joined employers too late to qualify for defined-benefit (DB) pensions and are only just starting to reach the age when they become pensions-aware. Millions of people in their 30s and early 40s are beginning to understand how meagre their own retirement provision is and how much longer their working lives may have to be compared with their public sector peers.

The bounce in share prices over the past few years has helped to ease the immediate difficulties for those employers that are still running defined-benefit pension schemes. The aggregate position of the 100 biggest UK-listed companies has improved from a £36 billion deficit 12 months ago to a £12 billion surplus today, according to the annual study from the consultants Lane Clark & Peacock, which gives a snapshot of the health of plc pensions. Big increases in company contributions and a favourable change to the discount rate - the number used to convert future liabilities into a present-day cost - have helped too.

But the aggregate figure masks some serious individual deficits, including those at British Airways, BAE Systems, and J Sainsbury. Moreover, the favourable conditions do not seem to have slowed the trend towards closing DB schemes or watering them down. Rolls-Royce, Unilever, Friends Provident and Marks & Spencer are among those to crack down in the past year.

Additionally, there is still a suspicion that some companies are making overoptimistic assumptions that inflate expected investment returns while shrinking liabilities.

Many continue to ignore the latest evidence on mortality while some are putting their trust in a booming stock market. The most optimistic assumption about equity returns (by Persimmon) is 27 per cent higher than the most cautious (by Next).

The response of well-off private sector workers has been to make additional pension contributions or save more in a private pension. As Standard Life reported yesterday, demand for doit-yourself pensions known as Sipps is rocketing, boosted by the 2006 pension reforms that improved the tax breaks and by the desire to have more control over investment decisions. The less well-off do not have that option.

Private sector pay has just started to outpace public sector pay after trailing it for several years. That new trend will have to continue if the sense of grievance is to be addressed.

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