The government’s proposed reforms to the four largest public service pension schemes will reduce the average value of the pension benefit for members of these schemes by more than a third, and also reduce the long-term government expenditure on unfunded public service schemes by around a quarter according to the Pensions Policy Institute (PPI).

Following Lord Hutton’s review of the public service pension schemes, the Coalition government’s proposed reforms include linking the pension benefits for public service workers to average salary, linking the Normal Pension Age (NPA) to the State Pension Age (SPA) for the four largest schemes: NHS, Teachers, Local Government and the Civil Service and increasing average contributions to be made by scheme members. Uniformed services will also be affected by these reforms.

PPI director Niki Cleal said: “The PPI’s analysis suggests that the combined impact of the Coalition’s government’s proposed reforms is to reduce the average value of the pension benefit for all members of the NHS, Teachers, Local Government and Civil Service pension schemes from 23 per cent of a member’s salary before the Coalition government’s reforms, to 15 per cent of a member’s salary after the reforms, a reduction in the average value of the pension benefit for members of these four schemes of more than a third.”

Despite this, Cleal stated that the benefit offered by all four of the largest public service pension schemes remains more valuable than benefits offered by defined contribution schemes in the private sector into which employers employers contribute around 7 per cent of a DC scheme member’s salary.

PPI research director Chris Curry added that the reforms “will also reduce net government expenditure on unfunded public service schemes from around 1.1 per cent of GDP by 2065 under the current system to around 0.8 per cent of GDP in the reformed system – a reduction of around a quarter.”

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