"The Government's proposed reforms to the four largest public service pension schemes will reduce the average value of the pension benefit for members of these schemes by more than a third, and reduce long-term government expenditure on unfunded public service schemes by around a quarter", says PPI
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: the NHS, Teachers, Local Government and Civil Service pension schemes. The analysis has been funded by the Nuffield Foundation and covers the potential impact of the Government's proposed reforms on the pension benefit offered to members of schemes and on the affordability and sustainability of the schemes.
Under the Government's proposed reforms to the largest four public service pension 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.
Niki Cleal, PPI Director, said: "The PPI's analysis suggests that the combined impact of the Coalition Government's proposed 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."
"Nevertheless, even after the Coalition's proposed reforms the benefit offered by all four of the largest public service pension schemes remains more valuable, on average, than the pension benefit offered by Defined Contribution (DC) schemes that are now most commonly offered to employees in the private sector, into which employers typically contribute around 7% of a DC scheme member's salary."
Chris Curry, PPI Research Director, added: "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."
"The reforms will also reduce net government expenditure on unfunded public service schemes from around 1.1% of GDP by 2065 under the current system to around 0.8% of GDP in the reformed system - a reduction of around a quarter."
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