Friday, 17 May 2013
Public sector pensions cut by a third
Nurses, teachers and other public sector staff will see a reduction of a third in the value of their pensions as a result of the Coalition's reforms, according to the Pensions Policy Institute.
Four million workers in the NHS, teaching, local government and civil service are in schemes which promise many of them a pension based on salary when leaving, or final salary.
But in future the pensions will be based on average salaries, members will have to contribute more and the retirement date will be aligned with the State Pension Age.
Typically the pensions are worth an extra 23 per cent on top of pay, according to the Institute, which is an independent research body.
That benefit will be cut to 15 per cent as a result of the reforms, though anyone anyone already retired or retiring within the next nine years won't be affected.
The findings don't mean that actual pension payments will be cut by a third. It's the combined effect of some pensions being lower, of people receiving them for a shorter period and of having to pay in more while working.
The Institute also forecasts that the long term cost of public sector pensions will fall as a percentage of the economy as a result of the reforms, from 1.1 per cent to 0.8%.
There has been heated debate about public sector pension schemes, because most private sector workers have to make do with much less generous provision.
Public sector workers have already seen annual increases in their pensions restricted to a lower rate of inflation, the CPI.