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   Pension Advice Norwich |  Public Sector Pensions


Call: 01603 452686

 

  Some pensions remain 'Gold Plated' but times they are  a'changing...

 

Topical Retirement Issues

 

 

    A job for life?

Public Sector Pensions have traditionally been quite generous. Part of the rationale behind this was that the basic salary, in many cases, was quite modest and the opportunity for a rapid rise in grades was limited. Unlike their private sector colleagues, 'civil servants' were seen to choose a modest salary, a good pension and job security rather than the opportunity of a (sometimes) higher salary and promotion opportunities associated with success in the private sector.

 

 

There are currently (June 2012) 11 Public Sector Pension Schemes and the number of members has increased from 4.2 million in 1995 to well over 6 million in 2011.

                     

Unlike state and private pensions, public sector pension arrangements are by many seen to be very generous. A number of public sector schemes still have a pension age of 60 and quite favourable early retirement provisions.

 

As mentioned elsewhere the public sector pensions are largely unfunded which means that current contributions are spent on paying pensions to people who are already retired, so there is no “magic pot of gold” accumulating anywhere.

 

The somewhat frightening fact is that the total unfunded public sector pension liabilities now are estimated to exceed £1 trillion! This is over 70% of the UK GDP, or equivalent to 153 times the current annual public spending (data from the TUC and ONS).

 

It has become clear, even to people without vast financial expertise, that the costs of these schemes have become untenable and employees may have to retire later or be forced to contribute more into their pension fund if the expected level of pension is to be achieved.

 

However, the sums in question are of such a magnitude that it could well take decades of stern reform before a real impact starts to be seen. So, there is little doubt that public sector workers look set to face the harsh reality of re-thinking their approach to saving for retirement.

 

There has long been some envy from private sector workers regarding the pension provisions of their public service colleagues.

 

There may be a grain of truth behind this envy as the accountants, PricewaterhouseCoopers, have calculated that, on average, private sector workers would need to put 37% of their salary into their pension to match the retirement income paid to a public sector worker on a similar wage (PricewaterhouseCoopers pers.commun. August, 2011).

 

Even public sector workers on modest final salary schemes might be surprised to learn how much they would need to save if they were in the private sector.

 

To get the average civil service pension of £5,928 a year you would need a pension pot of £189,151. The average NHS pension of £6,931 is equivalent to a pension pot of £221,155 and the average teachers’ pension of £9,358 is equivalent to a pot of £298,596 (based on data obtained by NFA from Hargreaves Lansdown, pers.commun. July 2011).

 

Building a pension pot of more than £150,000 is no mean feat - and the longer you leave it, the harder it will be to catch up on missed time.

 

A long running argument for the differences between public/private pensions has been that: public sector workers generally were paid lower wages in exchange for a higher degree of job security and a reliable and decent pension provision upon retirement i.e. the 'job-for-life' idea.

 

However, with rapidly changing employment patterns, remuneration strategies etc. within both the public and private sectors such stereo-typical views are now mostly of historical interest.

 

It is nevertheless becoming clear that the very generous public sector pension arrangements rapidly are becoming a thing of the past.

 

This rude awakening has led to a number of recent incidents of severe consternation and vociferous protests - which, no doubt, will not end end any time soon!

 

 

I don't want to retire right

now - maybe next year, or

the year after...

But, can I afford to cut down

on my work hours already?

     find out more 
 

Is it a good idea to buy an

Annuity now or is it better

to wait?

Should it be a single or a

joint annuity?

     find out more 

 
retired couple

What is the right way to

arrange our Investments?

How much risk can we

afford to take?

How much income can we get?

     find out more 
   

 

 

LET YOUR MONEY WORK FOR YOU!

 

 

 

 

 

 

 

 

VISIT THE DEDICATED NFA INVESTMENT SITE

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You are always Welcome

to contact NFA for a free discussion

of your Public Sector

Pension arrangements

 

Phone: 01603 452686

 

 

e-mail: info@norwichpensions.co.uk

 
     

 

 

 

 

 

Norwich Financial Advice Limited  is authorised and regulated by the Financial Conduct Authority

and is entered on the FCA Register under FCA reference: 706645

Norwich Financial Advice Ltd. is registered in England and Wales; Company No. 8533929.  

Registered office: 74 Muriel Road, Norwich NR2 3NZ, Norfolk, England.