Public servants facing big cuts to pensions
Public servants have enjoyed a generous guaranteed pension based on their earnings at the end of their career and length of service.
The typical annual payout from a civil servant’s final salary scheme is significantly bigger than that of a private sector employee.
But as we live longer, the rising costs associated with final salary schemes have put their future in doubt.
Following a review carried out by Lord Hutton in March, the UK’s six million public sector workers are faced with retiring later and paying more for a less generous scheme — career average pensions.
According to Hargreaves Lansdown, the financial advisers, a nurse starting on a salary of £15,000 and ending on one of £25,000 30 years later would receive an annual pension of £12,500 under a final salary scheme.
They will receive £11,957 under a career average.
On the other hand, a civil servant who started his career on £30,000 a year and 30 years later was bringing in a salary of £80,000 would lose almost £10,000 per year in retirement. A final salary scheme would give them £40,000, but the new career average would reduce it to just £30,662.
At the moment teachers get an average of just over £10,000 a year, with police on about £15,500.
But an employee in the private sector averages less than £2,000 a year on a retirement pot of around £30,000.