Final salary pensions meltdown confined to private sector

The divide between public and private sector final salary pensions grew again last year, statistics show.

The Occupational Pension Schemes Annual Report by the Office for National Statistics found the number of active members in private sector final salary schemes had dropped from by 300,000 to 2.7 million, while the numbers in the public sector had risen to more than five million.

Less than half of final salary schemes in the private sector remain open to new applicants, with many employees pointed towards defined contribution (DC) schemes instead. Average contribution rates for DC schemes were just 9.2%, less than half those of final salary schemes at 20.5%.

Ros Altmann, a former government pensions adviser, said that it was fuelling a dangerous apartheid between public and private sector workforces.

“As pension provision crumbles in the private sector, it seems the public sector is immune,” Altmann told the Daily Mail. “There is a pensions apartheid developing where 20% of the public sector workforce are keeping benefits that everybody else is losing.”

Overall, numbers using final salary schemes are down from 9.2 million in 2006 to 8.8 million last year. Nearly 2000 schemes covering over more than 300,000 pensioners or deferred members are in the process of ending. In three-quarters of the ending schemes, the employer had gone bust.

In this clip, Pinsent Masons employment lawyer Nicola Johnston says the report highlights the fact that final salary pensions will be less available in the private sector so employers face bigger losses if they make mistakes when dismissing those staff.  Also, the job they did and where they worked will have an important bearing.


 

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