Public sector pensions still beat private

Pension wordsearch

Public sector pensions are still far more attractive than private pensions, say pension experts.

However, the level of benefits varies greatly depending on the area of work with teachers, one of the main groups opposed to planned pension reforms, having to contribute significantly more than civil service workers. 

Public sector workers are set for a mass walkout today in protest against government plans to cut their pensions, amid other pay reforms but Tom McPhail, head of pensions at Hargreaves Lansdown, says that public sector pensions continue to be more attractive than their private counterparts.

"When measured both by comparison with typical private sector pensions and objectively in terms of the retirement security they confer to their members, public sector schemes are and still will be a very good deal for their members."

Private vs public

Figures from the Office for National Statistics and the Hutton review also show that current contribution rates vary significantly - not only between private and public sector but also within public services. Civil service employees only make 1.5% contributions towards their pension, which is then topped up with employer contributions of 18.9%. In comparison, teachers contribute 6.4% themselves while the employer contributes 14.1%.

However, McPhail says that rather than focusing solely on the public versus private, or even public versus public debate, the bigger issue is ensuring savers contribute enough into their pensions for a long enough time period:

"Public sector workers are understandably upset at the prospect of paying more and having to work for longer but everyone of working age, in the public and the private sector needs to get used to the idea of saving more, spending less and retiring later."

His comments follow on from Prime Minister David Cameron's claim that the reforms are "a simple fact of maths". Addressing the Local Government Group at its annual conference in Birmingham yesterday, he said: "Rational people will look at these proposals and see that this is good for the future of public sector pensions."

Cameron's words is likely to anger unions that maintain their members aren't making unreasonable requests.

Dr Mary Bousted, general secretary of the Association of Teachers and Lecturers (ATL), says Cameron's government is "morally responsible" for the strikes. She adds:

"Why is he [Cameron] asking teachers who already have a two-year pay freeze to suffer a 3.5% pay cut in the form of pension contributions on top of all the other hits being taken by all of us? The PM should not forget that public sector staff are also taxpayers."


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We should be proud of public sector pension provision and ensuring that private sector workers are treated as well. Many private pension funds have suffered from employers taking contribution holidays when funds were booming, rather than increase pensions. Now the rainy days are here.

Is it true that Civil Service pensions are still unfunded ?
(i.e. Do their pension contributions go directly to the Exchequer and their pensioners get paid from general taxation ?)

"Public sector workers are understandably upset at the prospect of paying more and having to work for longer but everyone of working age, in the public and the private sector needs to get used to the idea of saving more, spending less and retiring later."

Hmmm...this ideology is very convenient for those who profit from the changes, yet it is worth considering the motives of those who advocate change in the same way one would consider those who wish to maintain the status quo in whatever area. The question is 'who benefits by the changes?' and the answer is, generally, certainly not those affected.
I note that anyone who raises the issue of government funding to prop up, for example, the banking disasters is now shot down as employing an old and tired argument, in the same way that anyone who raises the spectre of Nazi Germany tends to be when making comparisons with current sociological developments. Is that because no one has come up with a suitable response to the questions these issues raise, and so would prefer to bury them?
For my part, I have seem from the inside the cost involved to the public purse of abortive government schemes, and more often than not it is the general public, in the guise of employees and taxpayers, who directly or indirectly pick up the bill. Are we not hearing more spin in the hope that we won't pick up on why there is such a shortfall in the public purse?

As a civil servant for 32 years, I am really sick, sore and tired of hearing ill-informed comments on public sector pensions that take this issue in isolation. Private sector workers, particularly those in the financial sector, have enjoyed the benefits of the boom years and many have earned more in a single year than public sector workers will over the course of their entire career. Indeed, on average, I have worked for 32 years at between a third and half the salary of my equivalents in the private sector. I know this from the offers I received from head-hunters over the years. I must say that I was prepared to do this because I have a public sector ethos, money has never been my prime motivation, but I did also plan to retire after 40 years and hoped to have a reasonable pension to live on in my twilight years as some compensation for acceptance of a modest salary for a lifetime. Give me a private sector salary and I'll happily contribute more - otherwise please focus on the buddies/ex-school mates of the current government who caused this (apparent) crisis !

One of the assertions made by the uninformed, the ignorant and those who simply wish to hide from the truth is that Public Sector Pensions are “unfunded”. The truth of the matter, certainly as far as the Civil Service is concerned, is that traditional occupational final-salary pension schemes are fully funded. They are fully funded in three ways. First, the traditional system of determining Civil Service pay by fair comparison with those doing the same or similar jobs in the Private Sector. An integral part of that system was that full account was always taken of the (eventual) provision of a decent pension i.e. each yearly (calculation) start point for a percentage annual pay increase was always lower than it would otherwise have been had an allowance (reduction) not already been made for that pension provision in each & every preceding year. Such system, of course, over (say) a 30-40 year career, having the effect of greatly reducing the value of both the pay and (subsequently) the pension actually received. A sort of cumulative interest payment system in reverse. Of course, today, pay rises are non-existent generally. Next, the Thatcher Government. For whatever reason, the iniquitous MrsThatcher hated the Civil Service to the extent that, whatever the fair comparison system revealed, pay rises (and therefore pensions) were artificially restricted. At one point during that period, forerunners of the present Public and Commercial Services (PCS) Union published irrefutable (factual) figures which proved that some 30% had been lost from pay. That penalty (and the aforementioned fair comparison system restriction) feeds through into final-salary schemes to this day, inclusive of both pay (any) & future pension calculations & provision. And, importantly, it always will. Finally, those currently employed in the Civil Service do, in fact, make a personal monetary contribution directly to their pension provision via regular (normally monthly) salary deductions. So, in conclusion, traditional Civil Service occupational final-salary pensions are indeed already “fully funded” through past pay restrictions and should now stop being targeted by an unelected, irresponsible and incompetent Conservative Government & its equally inept & embarrassing bedfellows, simply to save money whilst trying to give the impression that they are, somehow, doing the right thing in the current economic climate. All final-salary pension scheme provision must be retained in its present form, and the fair comparison pay system must be reintroduced. Realistically, the pay earned but already given up (as payment for future pension provision) over many, many years can never be recaptured, but at least no more ground would be sacrificed. Then, and only then, could a fully informed General Public be certain that those who serve their Country within the public service were (given even past losses & restrictions) again being fully & fairly rewarded for their efforts, and not being cheated out of decent pension provision for which full payment has already been made. Indeed, at the bottom line, just look at who the robbing villains actually are, MPs!! As the saying goes (in terms of highwaymen) at least Dick Turpin had the decency to wear a mask.