Saturday, 29 August 2009

PwC pensions report

Just a quickie, but the PwC report on pensions has got the usual suspects demanding that public sector pensions are scaled back dramatically. I can't find the report on the PwC website, but one stat looked a bit odd to me - 
It estimated that, at current prices, a projected pre-tax final-salary pension for a civi servant born in 1960 would be £28,900 for those in the public sector when they reached 66 years old, but £11,600 for those in the private sector.
It's that £28,900 figure. The civil service pension scheme has an accrual rate of 1/60ths, so aims at a max benefit of 2/3rds of final salary at retirement. So surely the figure above implies that a 'typical' member of the scheme will be earning a bit under £45K when they retire? I'm not an expert on civil service pay grades, but surely those earning £45k are going to be a relatively small number? Just a thought.

Also what are the assumptions for the private sector employee. I was born in 1971 and have two chunks of final salary scheme membership along with DC. I would have thought that many private sector employees born in 1960 have significantly more than I do. 

And finally what about this - 

"A generous final-salary pension is a great draw to talent for a career in public service, but it also has drawbacks in limiting the flow of people between the public and private sectors," said John Hawksworth of PwC.

"People with long civil service careers may be very reluctant to leave the scheme, especially now that it is rare to find anything comparable in the private sector."

True in the sense that anyone who knows what their final salary scheme is worth ought to take this into account - though this is definitely not always the case. But again this also applies to private sector employees who are in final salary schemes. It's not something unique to the public sector.

There are strange implications here too. What's wrong with people not wanting to move if they've got a good job with a good pension? Surely that is the point of employers (public and private sector) offering such benefits in the first place? You can't really blame people for valuing something that is valuable. All seems a bit wrong-headed to me.

But as I say, I haven't seen the report itself so perhaps all these questions are answered...

1 comment:

WizWard said...


Delighted to see your name in print again (or at least active on the web!). I am sure you don't remember me but I remember you and Michelle doing an excellent job presenting on pensions during the 'crisis' in 2003-2005.

Anyway, I was wondering if you have sinced managed to locate this elusive PwC report?


Martin Ward
Tel 07956 264186