- Friday, 13 July 2012
Official figures revealed yesterday that state workers are enjoying pensions double that of their private sector counterparts.
This is achieved despite state workers working fewer hours and earning 30 per cent more on average.
Figures from the Office for National Statistics show that 82 per cent of state employees are contributing to an occupational pension, with a typical retirement pot of £90,100.
But, only 38 per cent of private sector workers are contributing to a pension, with a total of just £40,000.
This shows that the figures are due to more state workers actually investing in a pension, whilst private sector workers tend to not contribute.
Another study - published yesterday by the Office for Budget Responsibility, the Government's metaphorical economic watchdog - revealed the extent of the public sectors responsibility:
Approximately £960billion has been made in retirement promises to today's public sector workers, the equivalent of £37,000 bill for every family.
Yet, experts liken this situation to an 'enormous Ponzi scheme' a scam investment designed to separate investors from their money because no money has been set aside to pay the expanding bills.
Financial advisers at Hargreaves Lansdown, have compiled exclusive figures which reveal the extraordinary gap between these two types of worker.
In a study, they examined two 26-year-olds, both earning the same salary throughout their 40-year working life, starting on £30,000 and ending on a salary of £60,000.
Their results showed that the civil servant would retire on an annual pension of £40,310, despite the Government's recent changes, whilst the private sector worker would get just £11,980 a year.
Ministers insist that public sectors must pay more for their pensions and work longer, so as to effectively earn it. They believe they should protect the lowest paid and those close to retirement.
Danny Alexander, Chief of Secretary to the Treasury, voiced his opinion that state workers continue to receive pension which are 'among the very best available'.
In other words, there is no logical reason for public sector workers to protest about the state of pensions; they are actually better off than first thought.
The OBR (Office for Budget Responsibility) have stated that changes to pension schemes will save taxpayers around £430billion over the next 50 years dues to workers contributing more money into the pensions and setting a higher retirement age.
Robert Oxley, campaign manager of the Taxpayers' Alliance said: “The difference in the value of public and private sector pensions is in stark contrast to who is actually paying for those provisions.
“We are all living longer so public sector staff must be prepared to pay more for their own retirement rather than expect taxpayers to foot the bill.”
Others say that private sector workers are effectively digging themselves a massive financial hole.
Joanne Segars, chief executive of the National Association of Pension Funds, said: “It is very worrying that in the private sector so few are saving into a pension of their own. Millions are on course to end up struggling on one of the worst state pensions in Europe.”
The ONS report has found that an outrageous 42 per cent of adults do not have a single penny saved for retirement.
It also showed that the average state worker with a full-time occupation is paid £14.83 per hour, compared with only £11.41 per hour for a private sector worker - a dramatic difference of 29.9 per cent!
This astonishing figure may be due to a lack of knowledge. Laith Khalaf, pension investment manager at Hargreaves Lansdown, said: “politicians and the savings industry need to encourage people to think about their retirement, and where their money is going to come from when they get there.”
From October, new policies will make pensions obligatory for bosses to pay into on behalf of their employees.
This is a radical and a long-awaited attempt to solve this crisis and requires all workers aged 22 upwards - but still below state pension age - will be automatically enrolled into a pension, although it is noted that this is non-mandatory and the employee can opt out.
Civil servants currently pay between 1.5 per cent and 5.9 per cent of their salary into their pension depending on their annual income and specific pension scheme.
Their contributions to this will rise again in the next two years, although this excludes the lowest paid.
By Ellen Mitchell
Government proposes to cut inflation increases for pensions - 08 November 2013
TUC welcomes DWP paper on defined ambition pensions - 07 November 2013
Hands off my pension - 06 November 2013
Review of benefits for the elderly - 17 October 2013