[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

Public sector pay and pensions gap

The Institute for Fiscal Studies (IFS) has released a report suggesting a widening pay and pension gap between the public and private sectors. Noting a 2.3% per annum increase in average public sector earnings from 2001-2005 compared with only 1.5% for the private sector, the Institute points out that the gap is wider still (2.4% versus 1.3%) once improved public sector and diminished private sector pensions are taken into account.

The IFS points out that if retirement ages had been increased for future service in the public sector rather than fully grandfathered for existing employees, then the pay growth in the two sectors would have been much more similar. The IFS adds a caution, pointing out that the government has negotiated lower accrual rates and benefits for some public pension schemes. But even if larger cuts were to be imposed, as all three parties suggest, the savings would not feed through to the public finances for many years.