The difference between private sector and public sector pension arrangements?
The release of Lord Hutton's report into public sector pension schemes perfectly illustrates how an explosion in the number of public-sector workers in the UK has contributed to an ever-growing liability for UK taxpayers. The vast majority of public-sector pension arrangements are based on an employee's final salary which can often bear little or no resemblance to the potential investment return on the pension funds in question. So why is there such a big difference between the private sector and the public sector pension setup?
The truth is that the public sector is guaranteed by the UK taxpayer and boom and bust periods in the UK economy have no impact upon funding arrangements. However, boom and bust scenarios have a major impact upon private companies which can in many cases lead to pension fund deficits and cash flow problems. When you also take into account the fact that private pension funds are invested in the stock market in the UK and worldwide assets for the future, thereby exposing them to the varying rates of return, this can and does have a major impact upon the final funding available to each and every pension scheme member.
Final salary pension schemes are few and far between in the private sector today despite the fact they are commonplace in the public sector. The UK government needs to reduce the difference between public sector pension payments and private sector pension payments otherwise more and more UK taxpayers will be funding public sector arrangements while they struggle to arrange their own funding for the future.
Will Lord Hutton recommend changes to the public sector pension set up?
Lord Hutton, the former Labour cabinet minister, is currently looking into the public sector pension set up in the UK amid speculation he is set to recommend major changes. It is believed that the report, which is due soon, will suggest that a new formula should be found to bring public sector pension arrangements more into line with those in the private sector. This has been something of a bugbea...Read More
The great pension divide
It has been revealed that public sector pension funding requirements will approach £4 billion a year over the next few years. While the ordinary worker in the private sector struggles with funding for the future, final salary schemes are now commonplace in the public sector. There is great concern that a divide is appearing in the UK whereby taxpayers are being saddled with massive future debts t...Read More
Pension scheme contributions halved last year
The average contribution paid into a company or private pension scheme has almost halved in the last 12 months, it has been revealed. According to researched conducted for the Prudential 2008 Retirement Savings Report, the average contribution to such schemes over the last year was £144.57 per month. Over the course of 2006, this figure had stood at £279.38 per month, the insurance giant said. G...Read More
The increasing cost of public service pensions to tax payers
While not something the UK government is ever likely to shout about, the revelation that the vast majority of taxpayers in UK will pay more towards the pension of public sector workers than their own (out of their council tax and the general taxation) is set to become a political battleground in the run-up to the next general election. As we have covered on the site on a number of occasions, Gordo...Read More
HBOS chief under attack over leaving package
Peter Cummings, formerly of HBOS, is this evening under attack for his £660,000 "parachute" and a £5.9 million pension pot. In what many see as the next stage of a government campaign to blacken the name of many former stars of the UK banking sector, the former head of corporate lending at HBOS could well see part of his remuneration package reclaimed by the authorities. However, is this the rea...Read More