It works in a very unpredictable way - I have plenty of purchased fonts with ligatures and several variants and styles (and some of them don’t work properly in Pages 4.3).
In Pages 5 the “Format > Font > Ligatures > (Use Default or Use All) produces quite random effects on its own but doesn’t seem to work well together with the Typography submenu in Fonts. There is no consistency - I have to keep closing and opening the “Typography” submenu in Fonts and sometimes it works. For some fonts it doesn’t work at all.
Try changing the “Use Default” and “Use All” few times and see if it helps.
It’s true enough OTF ligatures do work better in Mavericks - but didn’t improve in Pages 4.3 and are out of control in Pages 5. I was desperate enough today to download a trial version of Swift Publisher and all the ligatures work perfectly.
This is very frustrating. I’m grateful I have Pages 4.3 for the time being, but since I use Pages daily for layout work I will have to start looking for alternatives.