About two-thirds of public sector workers are women, about two-thirds of private sector workers are men. Men pay almost three-quarters of the income taxes which prop up public sector pensions, and of course the average number of years a former public sector worker will draw a pension will exceed the equivalent for a former private sector worker, because of the gender differential. Keep these facts in mind as you read this piece by Francis Elliott, Political Editor, in yesterday’s Times:
A 25-year-old starting work in the private sector would have to put almost a third of their salary into a workplace pension to match the retirement benefits of a colleague embarking on a career in the public sector, according to low-tax campaigners.
The pensions gulf between schemes available to those working for private companies and workers in state-run organisations remains acute, the Taxpayers’ Alliance says in a report published today.
Making contributions of 8.5 per cent of the average national wage of £28,600, a 25-year-old starting in a private sector job can expect to save a lump sum capable of buying an annuity of £6,412, it claims. In the public sector the same contributions on the same wage would earn an annual income of £17,563, it says. The private sector worker would have to save 30 per cent of their salary (£8,606 a year) to build the same entitlement.
The report ignores recent changes to pensions legislation, however. Those in direct contribution schemes, the norm in the private sector, no longer have to use their savings to buy annuities.
You can subscribe to The Times here.