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Public and private sector pension gulf revealed

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Published Date: 30 August 2009
By Tom Morgan
THE pension divide between public and private sector workers was exposed yesterday as evidence showed pay packages for government employees were being topped up with benefits worth a third of their salaries.
Employers would have to contribute up to 35 per cent of a salary into workers' pension schemes to match a public-sector pension, PricewaterhouseCoopers said.

Civil servants and NHS staff could be reluctant to move jobs because of the pensions, the
accountancy firm suggested.

John Hawksworth, head of macroeconomics at PricewaterhouseCoopers, said: "There are implications here for both public and private sector employers.

"A generous final-salary pension is a great draw to talent for a career in public service, but it also has drawbacks in limiting the flow of people between the public and private sectors. People with long civil service careers may be very reluctant to leave the scheme, especially now that it is rare to find anything comparable in the private sector.

"This not only creates potential distortions in the labour market but will also impose a rising burden on the taxpayer in future years as the relatively-large baby boom generation of civil servants is beginning to retire."

PricewaterhouseCoopers compared the fortunes of a state employee from the age of 21 to retirement with someone on the same pay in the private sector.

The public sector worker came out with a pension of £28,900, versus just £11,600 for the private sector employee.

Raj Mody, a pension specialist from the accountancy firm, said:

"Ultimately somebody has to pay for all these commitments and in the public sector that falls to taxpayers one way or another."





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  • Last Updated: 29 August 2009 9:12 PM
  • Source: Scotland On Sunday
  • Location: Scotland
 
1

Samcafe,

30/08/2009 06:14:15
Utter tosh and a dreadful piece of 'journalism'. Away and check your facts before insulting us all. Just for teh record, the average civil service pension pay out is £80 a week.
2

billengland,

30/08/2009 09:02:53
It is time to stop public sector pensions. Let them pay for their own, like everybody else.
3

Arminius,

Bei Uelzen 30/08/2009 09:13:29
"The public sector worker came out with a pension of £28,900, versus just £11,600 for the private sector employee" - a sweeping and very misleading generalisation. This "public sector worker" coming out with a pension of £28,900 would have to be earning between £50,000 and £60,000 and work in the public sector for 40 years.
PricewaterhouseCoopers is a private sector firms where the salaries exceed those of most public sector workers. No doubt they have their own agenda when producing such misleading rubbish.
4

bus user,

edinburgh 30/08/2009 09:42:50
The comments are are misleading as the article.
Many people in the public sector earn high salaries and have generous pension arrangements. To deny this is to ignore the reality. Many in the private sector earn high salaries and hve generous pension arrangments. No one ever denies this.
However, most in both sectors do NOT have generous salaries or pension arrangments. The difference is that public sector pensions are funded by all of us and this is fundamentally unfair.
I have changed jobs more than once in my working life. I have several bits of pension contribution in different places, public and private, and the sum worth of these is less than if the pension conributions had been portable throughout my working life.
The current way of dealing with pensions punishes people who move around during their careers and encourages some to stay put who would be better moving.
No such analysis in the article.
5

albanman,

Edinburgh 30/08/2009 10:53:20
A very skewed article indeed. As Arminius points out, to achieve a pension of 28,900 a public service employee would have to work 40 years and achieve an annual salary of almost 60,000. The vast majority of us fall far below that figure.

There were no complaints regarding private pensions whilst the economy was good and the stock market rising, with private company workers leaving with pensions well beyond the reach of most public sector employees. Now the stock market gamble has gone (temporarily) sour, and there is continual bleating from those in the private sector. Tough. The real struggle is for councils to find the money to pay final salary pension schemes, and this will result in worthwhile programmes being cut.

Thankfully, as a teacher in Scotland (planning retirement in 5 years) my pension will be paid mostly through the contributions of working teachers; we have no "pension pot" which is exposed to the whims of the stock market. It also means that retired teachers are not a huge drain on council resources.
6

ih8hibs,

30/08/2009 11:03:02
2 we do pay for our pensions, our employer also makes a contribution which is no different to the private sector, maybe those in the private sector should grow some gonads and fight for decent pensions.
7

Mcsnagpile,

30/08/2009 11:32:52
The problem with all pension schemes, it uses the labour of the next generation to pay for the last +++++commission; giving a lot of fancy jobs for the interim management.

Pension funds are a comparatively recent innovation for the masses, and cannot work in the long term. To wait thirty years to find out if you won or lost is not a really good game to play.
8

billengland,

30/08/2009 12:25:57
6 The employer's contribution is tax-deductible for them and tax-free for the employee; tax avoidance and tax shelter. Most people would rather have the money in this debt-fuelled economy we live in.

Having said that, most private pension schemes have gone down the tubes thanks to the forty thieves who run this country.

The savers have been robbed to bail out the borrowers.

 

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