Reforms reduce public sector pension benefits

The government’s proposed reforms for public sector pension schemes will reduce the average value of the schemes’ benefits by more than a third, according to research by independent charity the Pensions Policy Institute.

The research, The implications of the Coalition government’s reforms for members of the public service pension schemes, looked at the four largest schemes: the civil service, local government, NHS and teachers.

The research found:

  • The impact across all members of the civil service scheme is to reduce, on average, the value of the pension benefit from 27% of a member’s salary to 17%.
  • The impact across all members of the local government scheme is to reduce, on average, the value of the pension benefit from 22% of a member’s salary to 14%.
  • The impact across all members of the NHS and teachers schemes is to reduce, on average, the value of the pension benefit from 23% of a member’s salary to 14%.

The government’s proposed reforms include:

  • Linking public sector pensions to average salary rather than final salary.
  • Linking the normal pension age to the state pension age for the four largest schemes.
  • Increasing the average contributions to be made by scheme members.

The proposed reforms apply to all members, except those within 10 years of their normal pension age on 1 April 2012, who will have their pension calculated based on the previous rules.