Public sector pensions triple the size of private sector counterparts

28 August 2018
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Public sector workers will retire on pensions that are three times larger than those working in the private sector, research from campaign group the Taxpayers’ Alliance has found.

According to the organisation, a public sector worker earning an average wage of £28,600 a year will retire with an average annual pension of £17,563.

By comparison, a private sector worker earning the same amount will retire on just £6,412 – a difference of over £11,151.

The report compares occupational pensions that are available to new entrants in the private and public sectors.

A private sector worker would have to save 30% of their salary - £8,606 a year - to retire with a pension as large as a public sector worker’s pension.

The market value of a public sector employee’s pension would be worth £1.9 million more than a private sector worker’s pension fund on retirement.

The annual cost of public sector pensions was £38 billion in 2017, compared to £37 billion total spending on defence over the same period.

As public sector pensions are unfunded, they are paid out of general tax revenues.

Defined benefit (DB) schemes are rarely available in the private sector, as most firms now offer defined contribution (DC) pensions.

The Taxpayer’s Alliance is calling for all new public sector employees to join on the basis of a DC pension that is fully funded to help narrow the gap.

 “Stop kicking the can down the road”

As a result of the findings, the campaign group is calling for urgent reform of public sector pensions. John O'Connell, chief executive of the Taxpayers' Alliance, says: "Workers in the private sector are paying for their public sector counterparts to enjoy a retirement they can only dream of, and that disparity has been brutally compounded over the years by politicians continuously launching raids on private pensions.”

Mr O’Connell adds that pension promises made to public sector workers are unfunded and will continue to be paid out of general taxation. He believes this is unsustainable, as people are living a lot longer than was anticipated when these schemes were created.

"To stop kicking the can down the road, reforms must ensure that new public sector pensions are properly funded and not paid for by the taxpayers of the future, namely our children and grandchildren," he adds.

Comments

In reply to by anonymous_stub (not verified)

I seem to remember many years ago the public sector were encouraged to take smaller pay rises and would be rewarded with better pensions, therefore saving the tax payer money at that time, now the public sector are getting their rewards after trailing on the pay scale.

In reply to by anonymous_stub (not verified)

The Taxpayers alliance is a right wing highly political campaign group. I do not subscribe to your emails to get political views - I want to be informed on how to make the most of my money. If I want political views I can find them elsewhere.

In reply to by anonymous_stub (not verified)

I have no idea where this bloke gets his figures from, I work in the private sector and there is no way anyone I know would get those amounts . Maybe earning £28,000 you are likely to get £14,000 per year after 40 years work., If your lucky.There maybe some lucky enough to get a 40/60th pension would get near that, but those pensiobs are few and far between nowadays.

In reply to by anonymous_stub (not verified)

Upon reading this article by Stephen Little, with reference to public sector pensions, I have read some rubbish before and then his article is pure rubbish. I work in the public sector as a teacher and lecturer and my salary is £300 a year less than that quoted, my pension when I retire next year after 25 years service, will be just under £8000, so would Mr Little kindly explain to me how I could get a pension that he quotes, I would then be very pleased indeed. To get to the level quoted I have calculated that I would have to have worked at that salary for a minimum of 50 years! Please, before you print articles like these again just check the facts and don’t just blindly post them.

In reply to by anonymous_stub (not verified)

I'd like to know where he got these figures from! I'm a Civil Servant on a similar wage and my pension forecast is nothing like this, I will have approx 20 years service by the time I retire and your lucky if I will get £7,000 and that's paying in approx £175 month from my salary.It makes me mad when they keep trying to demonize Public Sector workers and their pension, we all pay in to our pension and pay taxes and NI.Go after the tax evaders not the hard working people.

In reply to by Susan Frost (not verified)

Pension

You answered your own question. You will have 20 years service NOT 40 years (a full career thus your pension accumulation reflects this.

In reply to by Susan Frost (not verified)

So what have you done for…

So what have you done for the rest of the average 40 year working career. If you only work for 25 years how can you expect a pension of someone working twice as long!

In reply to by anonymous_stub (not verified)

The usual lies from the so-called taxpayers' alliance. Public sector pensions are definitely NOT underfunded despite the claims. All are fully funded and this is a matter of public record.The real scandal is the pitiful pensions paid out by private sector companies.

In reply to by anonymous_stub (not verified)

"As public sector pensions are unfunded, they are paid out of general tax revenues."As has beenvssid by others, this is totally FALSE!My public sector pension GMPF is a fully funded investment based scheme, fully paid for by its members and by the employers pension contributions made during the working life of the employee, which are part of the salary package.Sadly this is typical of the coverage of public sector pensions, which is full of half truths and lies all designed to perpetuate a negative attitude towards the public sector.

In reply to by Robert Kingston (not verified)

Well said, Robert.

In reply to by anonymous_stub (not verified)

Local Government pensions do NOT come out of general taxation. They are funded by investments on the stock market etc just like private schemes.

In reply to by anonymous_stub (not verified)

You state in the article above "As public sector pensions are unfunded, they are paid out of general tax revenues." This is NOT true. All LGPS's (Local Government Pension Schemes) ARE funded - I paid 6.8% of my salary into my funded LGPS. Teachers, lecturers and civil servants are not funded, unless the teachers and lecturers are members of the LGPS.

In reply to by Jim (not verified)

You really have no idea what…

You really have no idea what you are talking about. Unfunded means the DEFINED benefit you get at the end carries NO investment risk. Your employer contribution GUARANTEES to provide you with a DEFINED benefit at the end with NO investment risk i.e. they will pay whatever is necessary to provide your defined pension at the end of your career no matter what it costs. It is funded by tax payers.

In reply to by anonymous_stub (not verified)

Typical of the Taxpayers' Alliance to want to encourage a race to the bottom. What they should be pressing is for private pensions to be as good as their public sector counterparts - but I suppose this wouldn't suit the main agenda of this questionable little organization.

In reply to by anonymous_stub (not verified)

I work for a Public Company and my final salary is no way near those figures, I could only wish they were. To me that looks like a 40/60th pension and also you would need to work for 40 years to get that, and how many people work 40 years for the same company, not many.

In reply to by anonymous_stub (not verified)

i think kicking the public sector for having a decent pension if you are lucky to retire at all at 67,there are so many more well off private sector businesses with massive pensions along with bankers utility company shareholders already creaming money out of the treasury,private sector pay less into treasury national insurance payments are far less ,lots of untaxed cash payments ,etc public sector worker s on low incomes do not get big pensions ,and reading this just over a thousand pounds a month for an income in retirement is deemed excessive why ,so everyone should get less then so the writer seems to think ,maybe if our tax system started looking at private businesses tax avoidance then all retiree,s could get a decent pension,and not at 67 years of age either i think thee writer has no idea on pensions ,now if i was an mp etc then i would love their pension ,ceos ,bankers ,doctors ,chief of police then your talking ridiculous pensions as they are at the ridiculous end of pensions plus accumulating massive salaries and savings ,the write live,s in a a very small circle of people if he is targeting minimum pensions and those of soldiers ,nurse,s people who are more important than a writer with an inaccurate view of the public sector ,,,,,,,,,,,,,,,,,,,maybe tax payers alliance are chasing the wrong earners or maybe they should chase tax dodgers not hard working people do not think many will be supping champagne from day one of retirement

In reply to by anonymous_stub (not verified)

I don't know where on earth the Taxpayer's Alliance gets its information from but the idea that someone in the public sector earning £27,600 a year would end up with an average pension of £17,563 a year seems rather far fetched. As a former Civil Servant I can tell them that, for a start, public sector pensions are not free and that the contributions made by employees have been greatly increased in recent years. To obtain a full pension normally requires 40 years service and, at best, would equal one half of final salary (if that is the scheme an employee is contributing to) so, on the salary quoted would equal £13,800. The actual average for such schemes would be considerably less than £17,563 because many staff do not reach 40 years service for reasons such as ill health or redundancy schemes. The latter has increased exponentially in recent years as the Civil service has been massively downsized. It is also worth pointing out that the great majority of Civil Servants only dream of earning £27,600 a year! The Taxpayer's Alliance would do better to concentrate its efforts on the massive waste of taxpayer's money caused by taking jobs out of the Public Sector and handing them over to private contractors who are often, at best incompetent and at worst so disastrously incapable the taxpayer winds up baling them out. A lot more expensive than the pensions of decent, hardworking and loyal Civil Servants who are directly accountable to the taxpayer in the first place!

In reply to by Terry Bravin MBE (not verified)

I remember that, too.

Public Pensions

With the recent victory by public service workers against the government on discriminating on age based pension schemes it will cost the govt extra 4 billion in pension payments. Anyone who joined the schemes before 31st March 2015 will able to retire at 60 as opposed to the state pension age.

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