Government reforms to public sector defined pensions will cut the average value of members’ schemes by more than a third, new research shows.
Analysis by the Pensions Policy Institute shows reforms to the four biggest public sector schemes – the NHS, teachers, local government and civil service – will see total pots fall dramatically.
The report shows the value of schemes will reduce from 23 per cent of a member’s salary to 15 per cent. But even after the reductions it says they will still be more valuable than private sector employees’ defined contribution schemes that average around 10 per cent of a member’s salary.
The typical private sector defined benefit scheme has an average pension benefit value of 23 per cent of members’ salary, assuming it is inked to the Consumer Prices Index. If linked to the Retail Prices Index then the average rises to 27 per cent.
Hargreaves Lansdown head of pensions research Tom McPhail says: “This shows that while public sector workers have suffered some swingeing cuts to their benefits in recent years, they will still do very well relative to the typical private sector worker who receives an average employer contribution into a defined contribution pension of around only 6 per cent of salary.”