Public sector pension worth three times that of private worker

PRIVATE sector workers have to save three times as much in their pension as government officials to get the same amount on retirement, a report found.

The research by the Taxpayers’ Alliance concluded that new public sector workers will retire on pensions three times larger than their private sector counterparts.

Baroness Altmann, a former Tory pensions minister, said last night that the report laid bare “the two class pensions system – with the pensions aristocracy funded by taxpayers and the rest of the population who are struggling to save”.

Separately, a Centre for Policy Studies report found households were now saving just 4.9 per cent of their disposable income – the lowest since 1963.

The Taxpayers’ Alliance found that for a new employee aged 25 on the national average wage – £28,600 a year – and making the same level of employee pension contributions, the public sector pension will be worth £11,151 a year more than the private sector pension.

The market value of public sector employee pensions would be worth £1.9million more than the pension of the private sector staffer upon their retirement. The study compared occupational pension schemes in the private and public sector, where contributions are made by both employer and employee.

It found that typically a private sector worker would have to save £8,606 of their salary a year to retire with a pension as large as the public sector worker’s pension.

This is because the Government contributes 12.5 per cent of earnings throughout a public sector worker’s career – compared with 4 per cent for a private sector worker

John O’connell, of the Taxpayers’ Alliance, said: “Workers in the private sector are paying for their public sector counterparts to enjoy a retirement they can only dream of, and that disparity has been brutally compounded over the years by politicians continuously launching raids on private pensions.

“To stop kicking the can down the road, reforms must ensure that new public sector pensions are properly funded and not paid for by the taxpayers of the future.”

£11,151

A public sector pension will be worth this amount a year more than a private sector pension with the same contribution