Govt reforms ‘damaging public sector pensions’
Government reforms have reduced the average value of public sector pension schemes by around three per cent, from 24 per cent to 21 per cent of salary, the Pensions Policy Institute (PP) has said.
The research also showed the cost to the taxpayer of public sector pensions will grow by 40 per cent over the next 20 years.
Liberal Democrat work and pensions spokesperson Jenny Willott hit out at the government over the secrecy covering public sector pensions.
“The true cost of public sector pensions is being deliberately withheld by ministers, so we are forced to rely on forecasts from independent experts,” she said.
But there was some good news for those on public sector pensions. They remain more valuable than private sector pensions, despite government reforms.
On average, public sector pensions are now worth 21 per cent of salary compared to a typical private sector defined benefit scheme worth 20 per cent of salary and a typical private sector defined contribution pension worth seven per cent, the Pensions Policy Institute (PPI) said.
The government has introduced several reforms over the last few years to bring public sector pensions more in line with the private sector, including increasing the normal pension age to 65 for new entrants, increasing the level of contributions and improving the rate at which members accrue pension rights.
Niki Cleal, director of the PPI, said: “Even after the government’s reforms, there are still significant differences between pensions in the public and private sectors.”
The PPI said the majority of public sector employees have a defined benefit pension linked to their final salary. In the private sector, two-thirds of employers have closed their defined benefit schemes and many now offer less valuable, defined contribution pensions.
“It is often assumed that better pensions in the public sector make up for lower pay,” Mr Cleal added.
“Although a job-for-job type comparison of pay is difficult to make between the private and public sectors, the evidence suggests that the picture is more complex than this.
“Women and low-skilled male workers seem to be paid relatively more on average in the public than the private sector. High-skilled male workers are paid more in the private than the public sector.”
