Taxpayers will have to find nearly $110 billion, almost 7 per cent of GDP, to pay the pensions of retired federal public servants, the latest Finance Department data says.
The "unfunded liability" has grown by more than $23 billion in just four years and smarter retirement decisions by increasingly finance-savvy public servants are contributing billions to the bottom-line nightmare for Treasury planners.
One of Canberra's leading financial advisers said the cost may be understated as more retiring bureaucrats make decisions allowing them to enjoy annual yields of up to 10 per cent.
The massive debt, revealed in the Finance Department's latest regular snapshot, only includes two government funds and excludes liabilities for military pensions and other Commonwealth super funds.
Concerns over the burgeoning bill for public sector retirees led to the establishment of the Future Fund in 2004, which is now worth $117 billion. However, the unfunded debt of $110 billion is additional to the liabilities that the Future Fund covers.
The two funds, the CSS and PSS, are now closed to new members because they are regarded as unaffordable. They have about 364,000 members, of whom about 148,000 are already retired.
As the members age and retire, according to the Finance Department's private actuaries Mercer Consulting, the costs of their super will continue to rise.
"Projected outlays" this year are about $4.7 billion, the report says, with the figure set to double by 2054.
Mercer believes the Australian taxpayers' Consolidated Revenue Fund, from which most government spending is drawn, can afford to keep paying the pensioners but it will not be cheap.
About $2.2 billion has been added to the unfunded debt as a result of public servants rejecting the option of taking a lump sum when they clear out their desk for the last time and opting instead to take a pension.
Mercer estimates the number of PSS members taking a pension instead of a lump sum on retirement has grown from 70 to 80 per cent.
The last report, in 2011, assumed that no CSS members took pensions. The assumption in the latest report has skyrocketed to 30 per cent.
Daryl Dixon, of Dixon Advisory, whose firm has advised thousands of retiring public servants, said the lump sum versus pension decision was not a tough one.
"Those pensions are so far better value yields," Mr Dixon said.
"There are yields of between 8 per cent and 10 per cent, CPI indexed. Nobody in the community is getting that."
Mr Dixon said the recent low interest rates, which he tipped to stay around for some time, and a greater propensity for retirees to seek advice would drive the continuing trend toward pensions and away from lump sums.
"People are making better decisions and you can see that trend continuing because interest rates are likely to get lower and the yields on these things are not changing at all," Mr Dixon said.
"People fortunate enough to be in these schemes should really be getting advice on the value of these things."