Are public sector pensions more generous than private schemes? Maybe for MPs...

A pressure group has taken aim at the pensions of civil servants, teachers and doctors. But public sector payouts are not as generous as the Taxpayers’ Alliance suggests, says James Moore

A teacher talks to a student. There stress of the job means few stay on until retirement age (Alamy/PA)

A retirement gravy train after years in the corridors of Whitehall – or a fair reward for years of public service?

Generous civil service pensions have been attacked by pressure group the Taxpayers’ Alliance as “unsustainable”, now that public sector wages are catching up with the private sector. It says that, based on the same level of employee pension contributions throughout their working life, a private sector worker would get £7,068 a year in retirement compared to £25,084 for a civil servant, £26,594 for an NHS worker, or £25,694 for a teacher.

This is because large parts of the public sector still offer guaranteed benefits linked to average salary and length of service. Almost all private sector workers now have to put up with “defined contribution” schemes, whose rewards are based on level of savings and investment performance.

“This racket cannot go on,” said former Sun editor Kelvin MacKenzie, who called the old-school “defined benefit” schemes “unfair and unreasonable”.

But a lot of assumptions are being made by the Taxpayers’ Alliance figures. And MacKenzie’s suggestion – cutting public pensions and letting them go on strike if they don’t like it – is akin to taking a stick of dynamite to your front door instead of paying a locksmith if you’ve forgotten your keys.

Recent strikes were partly fuelled by the public sector missing out on a surge in private sector wages during the inflation crisis. Official figures show average pay rises beating inflation by some distance.

True, some public sector pensions are very large – notably those for doctors (who are highly skilled, who we are badly short of, and who can quit the NHS for far more generous terms overseas).

However, most payouts are much smaller than the Taxpayers’ Alliance would have you believe. According to a 2021 House of Commons briefing paper, members of the Teachers’ Pension Scheme received an average of £12,300 per year. For those in the civil service scheme, the figure was just £8,100.

Why the discrepancy? Pay attention to that phrase “throughout their working life”. There may be the odd Sir Humphrey who kicks off a career in the civil service straight from university and stays put until retirement age, but most people move jobs or take career breaks or flit back and forth between public and private sectors. Many retire early because of stress.

For example, it is vanishingly rare to see teachers who stay in post until they are 67. imagine trying to teach maths to teenagers dreaming of careers as TikTok influencers when you’re 60. Even 55. Or having to stay on your feet all day in a reception class.

The TUC says there are 300,000 vacancies across the public sector, while its own polling found that nearly two-fifths of public sector workers have either taken steps to leave their profession or are actively considering it. What would launching an attack on pay and benefits do to those figures? What would be the impact on schools or the NHS?

“Schools, hospitals, police stations, and other essential services can’t run themselves,” says Unison assistant general secretary Jon Richards. “They need a workforce of public servants to deliver services for local communities.”

Lucille Thirlby, assistant general secretary at the civil service union, FDA, adds: “Does the Taxpayers’ Alliance believe people should be able to retire and live with dignity? The biggest pension issue we face is not the value of public sector pensions, but the fact that people are not being encouraged to save enough for their retirement and the existence of pensioner poverty.”

We can put that another way: part of the reason public sector pensions look good is because private sector provision is so bad. Perhaps that is something for the government to look at?

Pensions can be used as a recruitment tool – a point made by expert John Ralfe, who points out the generosity of the copper-bottomed scheme offered to retiring MPs.

If ministers are ever inclined to start talking pension cutbacks, it would be the worst sort of hypocrisy for them not to start with their own retirement benefits. Ralfe has dug around in the small print of the MPs scheme and based on this, he suggests that the annual cost is not 12.9 per cent of their salaries – just over £82,000 for MPs and substantially more for ministers – but a whopping 39.4 per cent. The real value of MPs’ pay and pension package adds up to more than £114,000, he says.