Public Sector Vs Private Sector Pensions
The Pensions Policy Institute is, as you’ll probably know by now, my favourite pensions educational charity. Niki Cleal, the Director of the PPI, was a guest on our Pensions Radio podcast a month or two ago and that edition of the show was very well received.
The PPI have recently published the results of research they have undertaken into the impact of the Government’s latest reforms of the public sector pensions in the UK. Those reforms, you’ll remember, have included the raising of the retirement ages for new entrants to 65 and increasing the level of contributions required of members of some schemes, but in many cases the rate at which scheme members accrue benefits has also been improved. This new research looks at the overall effect of those changes and compares the schemes with their private sector counterparts.
Headline figures coming from this research include:
- The reforms have reduced the average value of schemes [to employees] from around 24% of salary to 21% of salary.
- The schemes for the police, the armed forces and the fire service have reduced the average value from around 37% of salary to 33% of salary.
- Typical private sector defined benefit schemes are worth 20% of salary.
- Typical private sector defined contribution schemes are worth 7% of salary.
- Public sector employees are more than twice as likely as private sector employees to be members of an occupational pension scheme.
- 85% of public sector employees are members of an occupational pension scheme.
- 40% of private sector employees are members of an occupational pension scheme.
- Most members of public sector schemes are in defined benefit schemes.
- Only around 15% of private sector employees are members of defined benefit schemes.
- Employers contribute around £4,000 a year per employee in the public sector.
- Employers contribute around £1,600 a year per employee in the private sector.
If you’d like to read the whole report you can get to a downloadable copy by following this link: An assessment of the Government's reforms to public sector pensions
21 October 2008
Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.