On Wednesday 2.6m state employees are set to strike over government plans to make changes to public sector pensions. Schools are set to shut, flights will be delayed and public transport is expected to descend into chaos. So if you don’t work in the public sector you may be wondering what all the fuss is about – who really get’s the best deal on their pensions and is the government right to change what’s on offer?
Currently the wage bill for the public sector is enormous. The government recently pointed out that it spends more on public sector pensions each year (£32bn) than it does on the police and criminal justice system combined.
Generally speaking, public sector pensions are far more generous than the average private sector ones because A: public sector workers are more likely to have one and B: because public sector pensions are more likely to have a defined benefits as opposed to a defined contributions scheme.
Whilst the average defined contribution pension pot sits at around £28,000 for a private sector pension – the average public sector pension is around £7,000 a year, leaving many private sector employees wondering what all of the fuss is about.
The government have essentially said that the current cost of public sector pensions is unsustainable, so something has to give. They are proposing a series of changes, the most significant of which is the recommendation that public sector pensions be changed from a final salary basis to a pay out based on average pay over worker’s careers. There are also talks of increasing the age at which people can draw their public sector pension – to the same age as the state pension, and to cap the cost of public sector pensions to the taxpayer.
Though the cost of public sector pensions can’t be sustained at the same level in the current financial climate, one of the benefits of taking on a public sector jobs – which often involve more of a mental and physical investment is the generous pension schemes on offer, so is it really fair to take them away?
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