Public sector pensions more valuable than private sector, says PPI

On average public sector pensions are now worth 21% of salary compared to a typical private sector defined benefit scheme worth 20% of salary and a typical private sector defined contribution pension worth 7%.

The Pensions Policy Institute (PPI) will today publish new research that assesses the impact of the Government's reforms to public sector pensions.

The Government has introduced a number of reforms to the main public sector pension schemes in recent years. These reforms include increasing the normal pension age to 65 for new entrants to the public sector, increasing the level of contributions made by members to some of the schemes and improving the rate at which members accrue pension rights.

Many commentators have argued that, even after the reforms, the public sector pensions are too generous and too expensive. With this report, the PPI aims to set out the factual background to this important debate without making any such judgements.

Niki Cleal, Director of the PPI, said: "The Government's reforms have reduced the average value of public sector pension schemes by around 3%, from 24% to 21% of salary. The precise effects of the reforms, however, vary from scheme to scheme and for individual members of the public sector schemes."

"Even after the Government's reforms, there are still significant differences between pensions in the public and private sectors. Public sector employees are more than twice as likely as private sector employees to be a member of an employer-sponsored pension scheme." "The majority of public sector employees have a defined benefit pension linked to their final salary. In the private sector two-thirds of employers have closed their defined benefit schemes and many now offer less valuable, defined contribution pensions."

"After the reforms, public sector employees will receive, on average, a pension worth around 21% of salary. This is similar to a typical private sector defined benefit pension worth 20% of salary, but substantially higher than a typical private sector defined contribution scheme worth 7%."

"It is often assumed that better pensions in the public sector make up for lower pay. Although a job-for-job type comparison of pay is difficult to make between the private and public sectors, the evidence suggests that the picture is more complex than this. Women and low-skilled male workers seem to be paid relatively more on average in the public than the private sector. High-skilled male workers are paid more in the private than the public sector."