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Public sector to keep lead over private OPPs

Public sector pensions will provide between 3 and 18 per cent higher benefits than private sector pensions, even with both types of pension facing change, according to a report by the Pensions Policy Institute.

Reforms to public sector pensions include the normal retirement age increasing from 60 to 65, while benefit structures will be made more generous. They also generally involve a move from final salary to career-average.

Private sector scheme changes will vary by employer but generally involve a shift from defined benefit to defined contribution.

The report, Occupational Pension Provision in the Public Sector, offers a set of independent facts on levels of pension benefits, costs, and proposed reforms in private and public sector schemes. It looked at six main public sector pension schemes and a local Government scheme.

The report says public sector schemes are a significant and growing cost to the taxpayer – currently around 550bn – and that this will continue.

It claims there is no evidence that pay is lower in the public sector but it does say that low-paid workers are more likely to be under-pensioned in the private sector.

PPI director Alison O’Connell says: “All pensions must react to the fact that people are living longer. Current proposals for public sector reform are a more modest reaction than the cutbacks in private sector occupational pensions. Public will still be better than private sector pensions after the reforms.”


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