136 lines
3.9 KiB
Plaintext
Executable File
136 lines
3.9 KiB
Plaintext
Executable File
finance
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personalfinance
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comment
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paulfarrow
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8323713
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-----
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# Public sector pensions: workers face brutal reality check
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## Another nail has been hammered into the coffin of public sector pension
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schemes. As each month passes by, more and more damning evidence emerges that
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proves that the current system is untenable.
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[![Paul Farrow][1]][2]
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By [Paul Farrow][3] 4:07PM GMT 14 Feb 2011
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[Comments][4]
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Teachers, nurses, firefighters and others are under no illusion that their
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pensions face a major overhaul - and last week their fears would have been
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confirmed.
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Public sector retirement promises have become a "Madoff-style pyramid, now
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collapsing under the weight of insufficient contributions, rising longevity
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and an ageing workforce", said the Centre for Policy Studies in its report,
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Self-sufficiency is the Key.
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The Independent Public Service Pensions Commission, headed by Lord Hutton, has
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already published its interim report, giving clear pointers as to the changes
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that will be recommended next year. The reason is simple: we just can't afford
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to keep them going.
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Over the past 10 years the amount paid in benefits by the five largest public
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service pension schemes has increased by 32 per cent. This rise has been
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driven by an increase in the number of pensioners, the expansion of the public
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sector workforce, longer life expectancy and the extension of pension rights
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for early leavers and women.
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Lord Hutton has questioned whether the contributions made by public sector
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employees reflect the true cost of the benefits they receive. They don't.
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(Anyone trying to secure an equivalent retirement income in the private sector
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would have to invest significantly more into their pension plan.) He also
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found that final salary schemes favoured high-flyers, rather than workers
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whose career progression was more modest.
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There are several options open, such as paying pensions based on a career-
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average salary rather than a final salary. It won't be good news for many
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workers: Mercer, the actuary, calculates that a teacher could be £10,000 a
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year worse off by moving to a career average pension.
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Another is to opt for hybrid schemes that combine elements of the existing
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schemes and the newer defined contribution schemes. "DC" schemes are
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fundamentally different from final salary schemes, as the pension paid depends
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on how much you and your employer put into the fund, the performance of stock
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markets and annuity rates.
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But whichever route the Coalition goes down, it seems certain that workers are
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going to have to put their hands in their pockets and pay more into their
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pension pot.
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The worm is turning. Workers who entered the public sector for job security
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and a decent pension are now looking over their shoulders, unsure what the
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future will bring. It is a burden that the private sector has had to cope with
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for years. Welcome to our world.
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**[![][5] ][6]Visit [Telegraph Retirement Services][6] for help and advice**
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[X][7] Share & bookmark
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[What are these?][8]
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* Share: [Share][7] [ ][9] [ ][10]
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[Tweet][11]
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http://www.telegraph.co.uk/finance/personalfinance/comment/paulfarrow/8323713
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/Public-sector-pensions-workers-face-brutal-reality-check.html
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Telegraph
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## [Paul Farrow][2]
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* ### [Finance »][12]
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* ### [Personal Finance »][13]
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* ### [Comment »][14]
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* ### [Pensions »][15]
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[X][7] Share & bookmark
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Delicious Facebook Google Messenger Reddit Twitter
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Digg Fark LinkedIn Google Buzz StumbleUpon Y! Buzz
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[What are these?][8]
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Share:
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* [ ][7]
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* [ ][9]
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* [ ][10]
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* [Tweet][11]
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* Advertisement
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![][16]
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telegraphuk
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