Public service pensions

22 September 2011

The Government’s proposals

In his speech on 17th June, the Chief Secretary said:

•“We are all living longer. That means more years spent in work, as well as in retirement. To keep the best pensions in the country, you will have to contribute more. Those contributions will support your pension, not subsidise the pensions of top earners. So when you do reach retirement age, the pension you receive will be broadly as generous for low and middle income earners, as it is now. At the same time we are protecting the pension that you have earned to date. We are reforming for the future, but we will not touch the pension that you have already earned.”

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GAD audited information provided in July

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Table 2 - Pension benefits received from existing final salary compared to new CARE pension schemes under different accrual rates

Individual

Benefits from existing final salary scheme

Total benefits from existing final salary scheme Benefits from CARE scheme with earnings uprating and accrual rate of:

(lump sum) 1/80ths 1/75ths 1/70ths 1/65thsNurse £13,767 £15,832 £16,183 £17,261 £18,494 £19,917

(£41,301)Teacher £18,898 £21,732 £21,619 £23,060 £24,707 £26,607

(£56,693)Civil servant £14,879 £17,110 £15,410 £16,437 £17,611 £18,966

(£44,636)LG offi cial £10,306 £11,852 £11,461 £12,225 £13,098 £14,105

(£30,918)

Table 1 - Pension benefits received by a typical nurse with accrual in both the old and proposed new arrangementsAge when new scheme starts State Pension Age Total pension benefits (including benefits accrued in final salary scheme)

1/80ths 1/75ths 1/70ths 1/65ths50 66 £17,582 £17,949 £18,369 £18,85340 67 £17,370 £17,989 £18,697 £19,51430 68 £17,131 £18,003 £19,000 £20,150

New entrant 68 £16,183 £17,261 £17,261 £19,917

IFS career salary progression - Men

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Source: Disney, Emmerson and Tetlow - calculations using data from the LFS (1994 to 2006)

IFS career salary progression - Women

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Source: Disney, Emmerson and Tetlow - calculations using data from the LFS (1994 to 2006)

Comparison with NPA60 schemes

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•Uses IFS’ real career profiles

•Lump sums valued at actuarially fair rate

•Career from age 22 to NPA with three year career break starting at age 30

•Replacement rate includes Basic State Pension

Pension benefits received for nurse with accrual in NPA60 and proposed arrangements

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Comparison with NPA65 schemes

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•Uses IFS’ real career profiles

•Lump sums valued at actuarially fair rate

•Career from age 22 to NPA with three year career break starting at age 30

•Civil Servant is comparison with NUVOS

•Replacement rate includes Basic State Pension

Comparison with weighted average of NPA60 and NPA65 schemes

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