Post by Focus on Feb 23, 2013 12:00:38 GMT
The growing apartheid between pensions enjoyed by millions of public and private workers was laid bare in a devastating report yesterday.
Official figures showed just 26 per cent of private sector staff saving into workplace pensions pay into a gold-plated final salary scheme - compared to a huge 91 per cent in the public sector.
These types of pensions typically pay out £10,000 a year more in retirement than ordinary alternatives, industry figures show.
Tom McPhail, head of pensions at Hargreaves Lansdown financial adviser, said: ‘Retirement savings are in decline just about everywhere - but public sector workers have been largely insulated from this harsh reality.
‘Despite attempts to increase the amount they pay towards their pensions, state staff are still enjoying far, far better benefits than the rest of society.’
State staff : Tom McPhail, from Hargreaves Lansdown, said retirement savings were in decline 'but public sector workers have been largely insulated from this harsh reality'
In total, the number of private sector workers saving into a pension has fallen to its lowest level since 1997 when the Office for National Statistics first started recording these trends.
Just 32 per cent of workers were putting money aside for old age, slightly down from 33 per cent in 2011.
By contrast, some 83 per cent of public sector staff were saving into a pension at work - no change from the year before.
Overall, 46 per cent of the workforce are making some sort of contribution to a company scheme with their current employer - down from 55 per cent in 1997.
Pensions minister Steve Webb said government reforms introduced last October - which force all companies to enrol their staff into a pension - will stem the tide.
Stem the tide : Pensions minister Steve Webb said government reforms introduced last October, which force all companies to enrol their staff into a pension, will stop the trend
The Department for Work and Pensions estimates 11 million people will be signed up to a work pension scheme for the first time in the next six years.
However, experts warn that the gulf with the retirement benefits handed out to teachers, doctors, nurses and other public sector staff will continue to widen.
The ONS report found just four in ten of private sector workers get a contribution of more than 10 per cent of their salary from their boss.
By contrast, 94 per cent of public sector pension members get more than 12 per cent added into their pot.
This is because gold-plated final salary pensions are dying out in the private sector, yet are still widely available to public servants.
Record numbers of private firms shut their final salary pensions in 2012, largely due to costs and greater longevity, leaving just 13 per cent open to new members compared to 19 per cent in 2011. In 2005, the number was 43 per cent.
Instead they are now putting staff into so-called ‘defined contribution’ pensions, which are much less generous.
Lowest since 1997 : The number of private sector workers saving into a pension has fallen to its lowest level when the Office for National Statistics first started recording these trends
For example, a typical version of these cheaper pensions would give a 40-year-old man earning £40,000 a year an income of £5,141 a year when he retires, figures for the Mail show.
In a typical public sector pension he could expect £16,666 a year - a huge difference of £11,525.
Joanne Segars, chief executive of the National Association of Pension Funds, said: ‘This is a real low point for pension saving.
‘It is unnerving and unsustainable that only a third of the private sector workforce is saving into a pension.
‘This is storing up huge problems for our society, as people simply will not be able to retire in comfort, and will lean more heavily on the state.’
David Robbins, of pensions consultancy Towers Watson, said: ‘From here, the only way is up - however, the picture will not be transformed overnight.
‘Automatically enrolling staff into a pension takes the hassle out of joining a scheme, but the amount of money being saved is unlikely to be enough to produce a comfortable retirement and workers need to realize this and do something about it’ ...
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