Public Vs Private: Who Gets The Best Pension?

British Households '£11 A Week Worse Off'

Britain's public sector workers have gone on strike over demands that they pay more into their pensions, work longer and take pensions based on an average, rather than final, salary.

But how does their retirement situation compare to those in the private sector?

The Comprehensive Spending Review insists that all employees' contributions for public sector pension schemes should be increased by 3%.

That would take teachers' pensions contributions up from 6.4% to 9.4%.

But accountants PwC say private sector workers would have to pay anything from 15% to 40% of their pay into defined contribution plans to get equivalent benefits, depending on the scheme and their age.

Age of retirement
The retirement age for teachers, NHS workers and civil servants has been increased from 60 to 65, but only for new recruits.

However, these workers will still be guaranteed a pension scheme for life upon retirement.

Those in the private sector, who see a less generous return on their pension contributions, may find themselves forced to work well beyond 65 in order to be able to afford to retire.

Value of Pension
Even though public sector workers are facing payout based on their career average salary, rather than the one they finish on, many in the private sector have also seen final salary schemes axed and replaced with less attractive defined contribution (DC) schemes.

The Institute for Fiscal Studies calculates that public sector benefits are on average 14% greater than their private sector equivalent.

This helps explain why takeup among private sector pensions schemes has fallen in recent years, while public sector rates of participation have a small overall rise.

Government figures show in the private sector, 39% of male employees and 28% of female employees belonged to a workplace pension scheme in 2010.

In the public sector, male employee membership of workplace pension schemes was 87% while female employee membership stood at 82%.

Lord Hutton's pension report noted that high-flying civil servants in some cases saw up to double the return from their pensions contributions than those on lower rungs - distorting the average.