Personal Account

Civil servants and unions have us over a barrel – but public sector pensions must be reformed or future taxpayers will buckle under their weight

The nation is on the cusp of a retirement wealth split. Inflation is about to open up a chasm between the pensioners who were left to save for their own retirement and those who will be forever sheltered by the taxpayer.

The gold- plated pensions still on offer in the public sector come with a copper-bottomed guarantee against inflation and, as our cover story reveals, legions of retired civil servants can expect a pay rise of around 10pc next year as a result.

Meanwhile, most private sector employees simply have a pot of money they have to stake on the stock and bond markets. The better markets perform, the richer the retirement.

The pandemic, war in Ukraine and now surging prices have caused investments to plummet and highlighted just how vulnerable private sector pensions are to a crisis. What is also becoming clear is that there are many public servants who still don’t know how lucky they are.

While some of us are hanging up the bunting this jubilee weekend, rail workers will be plotting the biggest strikes in modern history, threatening to bring a summer of discontent in the age-old dispute over wages and jobs.

It’s the last thing many long-suffering commuters such as myself want. We’ve already been forced to swallow significant rail fare increases this year on top of countless other relentless price rises.

Pension expert John Ralfe tells me membership of the Railways Pension Scheme is worth more than 50pc of salary, with commuters and taxpayers ultimately on the hook to pay these generous promises. Members can still retire at 60.

Conversely, those with basic private sector pensions can expect their employer to pay just 3pc of their wages towards their retirement fund.

Many in public service have forgotten how good they have it at the expense of those who pay their wages. How many of us can hold the country to ransom if we don’t get the pay rise we need to ease the cost of living squeeze this year?

It used to be that a decent pension made up for lower wages, yet average salaries in the public sector now trump those paid by private companies.

Public sector pensions also provide priceless peace of mind. Those who work for the Government or the NHS will never have to worry about fees, risk, or when the next stock market crash is coming.

Telegraph Money this week revealed that the cost of boosting the state pension and public sector pensions in line with inflation will likely cost the stretched taxpayer another £13.5bn. And that’s just next year’s bill; the cost of honouring all public sector pensions is snowballing and now stands at more than £2.4 trillion.

Could this vast cost mean the Treasury finally has a rethink over just how affordable these pensions are? Of course not. These unaffordable pension promises are being bottled up for future taxpayers and voters to deal with.

Things won’t change because it’s the civil servants on track to a rich retirement who would have to push through such reforms.

If anyone dared to suggest scaling back public sector pensions for the good of the taxpayer, the country would be promptly ground to a halt.

Could the vast cost mean the Treasury finally has a rethink? Of course not