What Is The True Value Of A Public Sector Pension Scheme These Days?

Article Written By: BSM

The idea of a job for life that has fluttered around Public Sector organisations for many years seems to have become a thing of the past. And now, changes are coming to public sector pension schemes will have an impact on those employees that have managed to escape the flailing axe of deficit reduction. Life for those who remain is far from a fairy tale.

Jobs with benefits?

Although final salary schemes have been all but extinct in most sectors for years now, the public sector has been the final stronghold of the scheme. The removal of the final salary schemes is a big money-saving move for the government, but arguably it's a key benefit for many civil servants in lieu of a higher salary in the private sector.

Key to the proposals is the effort to standardise the typical retirement age to bring it to the same age as the age at which the state pension can be drawn. On close inspection of the figures however, public sector workers will now have to work for more years for a smaller pension.

Forgetful Firemen

Typically, public sector staff do settle for lower typical salaries than they would get in the private sector fulfilling equivalent roles. However in place of the salary sacrifice, the additional benefits - particularly more generous pension schemes - were significantly better. But with the changes, will we see a shift of workforce to the private sector? Arguably this may be something the government would be happy to see happen, assuming essential services aren't adversely affected.

Also, while the alignment of the standard retirement age to the pension age seems like a fair move at first glance, there may well be cause for concern. Do we want to see 65 year olds up a fireman's ladder? It conjures up images of rescuers putting their backs out when climbing ladders or forgetting what they were in the middle of doing. OK, perhaps that sounds a little harsh, but in some job roles, it may well be that it is almost as cost effective for the government for some people to retire slightly sooner for health and safety reasons, even if it means drawing a pension sooner.

Decreased costs in the long term?

The reality for workers in this part of the public sector is that it may not be possible to work until 65 and with the introduction of average salary schemes this could have rather significant implications for their retirement income. It seems that the once game-changing public sector pension scheme will no longer be enough of a draw to compensate for lower salaries than in the private sector.

The savings in public spending may be vital as the government seeks to reduce the deficit in the next few years, but it looks like for public sector workers effectively footing the bill, the costs are mounting.

About the Author

John T Hughes - Independent Financial Advisor.co.uk, a site specialising in finding you expert advice on retirement products such as annuities.

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