Pension benefits for members of the largest four public service schemes will be cut by more than a third as a result of proposed government reforms according to the Pensions Policy Institute (PPI).
The changes to public service schemes by the Coalition will see the pension benefit linked to a member’s average salary, the Normal Pension Age increasing in line with the State Pension Age and member contributions increasing.
The PPI has calculated that the alterations will reduce the average value of the pension benefits for all members of the NHS, Teachers, Local Government and Civil Service Pension Schemes from 23 per cent of a member’s salary before reforms to 15 per cent after the reforms.
Despite this, it was noted in the research that public sector pensions will still be more valuable than the benefits offered in the majority of private sector schemes.
“The impact of the government’s reforms on members of the public service pension schemes will vary for scheme members with different characteristics. High-flyers with fast salary progression may see a larger reduction in the value of their public service pension under the government’s proposed reforms than scheme members with more modest salary progression,” PPI director Niki Cleal commented.
She added that “public service pension schemes will remain more valuable than the pensions that are now most commonly available to employees in the private sector which are typically worth 10 per cent of a scheme member’s salary”.