Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • May 2013
05

Public service pensions 'will be cut by a third' by reforms

Open-access content Friday 17th May 2013 — updated 5.13pm, Wednesday 29th April 2020

The government’s public sector pension reforms will reduce the average value of a pension by more than a third, according to analysis published by the Pensions Policy Institute today.

2

In The implications of the coalition government’s public service pension reforms the think-tank detailed the effect the proposed reforms will have on the NHS, local government, teachers and civil service pension schemes. Together, these account for around 85% of public sector pension scheme members.

Under the plans, the value of a pension will be linked to a worker's career-average salary and not their final wage, member contributions will be increased and the normal pension age will be linked to the state pension age. The plans were passed into law last month as the Public Service Pensions Act 2013.

In its report, the PPI states that the reforms will reduce the average pension's value from 23% of a person's salary to 15%. The impact will be greatest for members of the civil service scheme, where the value of a pension will fall from 27% of the average salary before the reforms to just 17%.

The PPI noted, however, that public sector defined benefit schemes would still remain significantly more valuable to workers than the defined contribution offerings which were generally the only choice available to private sector workers.

Niki Cleal, PPI director, said: 'Even after the coalition's proposed reforms, the benefit offered by all four of the largest public service pension schemes remains more valuable, on average, than the pension benefit offered by defined contribution schemes that are now most commonly offered to employees in the private sector.'

Chris Curry, PPI research director, added: 'The impact of the government's reforms on members of the public service pension schemes will vary for scheme members with different characteristics.

'High-flyers with fast salary progression may see a larger reduction in the value of their public service pension under the government's proposed reforms than scheme members with more modest salary progression.'

The changes will reduce the cost to the government of providing unfunded public service pensions by around a quarter, the PPI found. While under the current system net government expenditure on the schemes is expected be total around 1.1% of gross domestic product by 2065, under the new system, it will amount to around 0.8%.

This article appeared in our May 2013 issue of The Actuary.
Click here to view this issue
Filed in:
05
Topics:
Pensions

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Underwriting Risk Manager

London (Central)
£85K-£95K + Benefits
Reference
124386

Reserving Manager (Contract)

London (Central)
£1200 - £1400 per day
Reference
124385

Life Actuary - Contract - IFRS 17 Financial Impact

England, London / England, Bristol / North Yorkshire, England
£900 - £1150 per day
Reference
124384
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2022 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ