Pensions - Articles - PPI Public Sector Pensions Briefing Note


 "The Government's proposed reforms to the NHS, Teachers, Local Government and Civil Service pension schemes will reduce the average value of the pension benefit for members of these schemes by more than a third.

 However, even after the Government's proposed reforms, public sector pensions will still be more valuable than most private sector pensions" says Pensions Policy Institute.

 The Pensions Policy Institute (PPI) is today publishing an independent assessment of the impact of the Coalition Government's proposed reforms to the four largest public service pension schemes on the value of the pension benefit for members of these schemes. The analysis has been funded by the Nuffield Foundation and covers the potential impact of the Government's proposed reforms for members of the NHS, Teachers, Local Government and Civil Service pension schemes.

 Under the Government's proposed reforms to the largest four public service schemes the pension benefit will be linked to the member's average salary, the Normal Pension Age is due to increase in line with the State Pension Age and member contributions are set to increase.

 The PPI's analysis suggests that the combined impact of the Coalition Government's reforms is to reduce the average value of the pension benefit for all members of the NHS, Teachers, Local Government and Civil Service pension schemes from 23% of a member's salary before the Coalition Government's reforms, to 15% of a member's salary after the Coalition Government's reforms, a reduction in the average value of the pension benefit for members of these four schemes of more than a third.

 However, even after the Government's proposed reforms the average value of the pension benefit for members of the four largest public service schemes would remain more valuable, at 15% of a scheme member's salary, than the pensions which are most commonly available to employees in the private sector. An average defined contribution scheme in the private sector would typically be worth 10% of a scheme member's salary.

 Niki Cleal, Director of the PPI, said:

 "The impact of the Government's proposed reforms to the NHS, Teachers, Local Government and Civil Service pension schemes is to reduce the average value of the pension benefit for all members of these schemes from 23% of a member's salary before the Government's reforms, to 15% of a member's salary after the reforms, a reduction in the average value of the pension benefit for members of the four largest public service schemes of more than a third."

 
 "The impact of the Government's reforms on members of the public service pension schemes will vary for scheme members with different characteristics. High-flyers with fast salary progression may see a larger reduction in the value of their public service pension under the Government's proposed reforms than scheme members with more modest salary progression."

 "Even after the Government's proposed reforms, there are still significant differences between pensions in the public and private sectors. In 2011, less than 10% of private sector employees are members of an open defined benefit scheme, compared to around 85% of public sector employees."

 "After the Government's proposed reforms, members of the NHS, Teachers, Local Government and Civil Service schemes will receive, on average, a pension benefit worth 15% of a member's salary. Even after the Government's reforms, public service pension schemes will remain more valuable than the pensions that are now most commonly available to employees in the private sector which are typically worth 10% of a scheme member's salary."
  

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