Page last updated at 23:04 GMT, Friday, 28 August 2009 00:04 UK

'Generous pensions' row reignites

Doctor
NHS staff have an average pension of 6,500 a year, Unison says

Employers would have to contribute up to 35% of a salary into an employee's pension scheme to match a public sector pension, PricewaterhouseCoopers says.

The accountancy firm suggested that the "generosity" of pensions for workers such as civil servants and NHS staff could stop people moving jobs.

The trade union Unison, however, said public sector workers' pay compared poorly with the private sector.

And many were part-time and unable to build up sizeable retirement incomes.

Research

PricewaterhouseCoopers (PwC) said private sector employers would face a huge bill if they tried to keep up with the value of a final-salary pension scheme for a public sector worker.

[Final salary pensions] have drawbacks in limiting the flow of people between the public and private sectors
John Hawksworth, PwC

It found that the employer could have to put up to 35.5% of that worker's salary into the pension pot.

With many businesses shutting their final-salary schemes, PwC compared a final-salary public sector pension with a less generous defined-contribution scheme in the private sector, where employers typically contribute 6% of an employee's salary.

It estimated that, at current prices, a projected pre-tax final-salary pension for a civil servant born in 1960 would be £28,900 for those in the public sector when they reached 66 years old, but £11,600 for those in the private sector.

"A generous final-salary pension is a great draw to talent for a career in public service, but it also has drawbacks in limiting the flow of people between the public and private sectors," said John Hawksworth of PwC.

"People with long civil service careers may be very reluctant to leave the scheme, especially now that it is rare to find anything comparable in the private sector."

Debate

Trade union Unison contested the conclusions, arguing that public sector workers such as nurses and local government staff were usually not as well paid as staff in the private sector.

A spokeswoman added that no bonuses or perks such as company cars were available to most of these staff and many had not completed enough working hours to build up a generous pension.

She said that the typical local government worker would have a retirement income of £3,800 a year. In the NHS, the figure grew to £6,500 a year - although this was distorted by higher-paid consultants and GPs.

In a recent interview with the BBC, Lord Turner - the author of an influential report on the future of pensions - said that public sector workers should be moved to more flexible pension schemes.

The government has said that it has been reforming public sector pensions to ensure their affordability in the future. New entrants to the civil service have a pension based on a career average income, not final salary, and a retirement age of 65.



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