Public sector pensions still beat private
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."