If the reality of the spiralling cost of public sector pensions has not hit home with Joe Public as yet, then a new statistic popped up this week to show how hard the pensions crisis is hitting us all, and hitting us right where it hurts: in the pocketbook.
The fact is that 25% of all money collected in Council Tax across the UK now appears to be sluiced straight into the pensions of town hall workers, which like so many other pension schemes are showing massive shortfalls year upon year.
Each year, the state pays £10.8bn to fund the generous final salary pensions of former town hall and council workers, half coming from the pensions contributions of existing workers, and half from taxes. In other words, over £5bn of those costs comes from the taxpayer, a sum equal to a quarter of all council taxes collected nationwide.
The Office for National Statistics (ONS) said this week that unfunded public sector pensions are now costing a massive £16,000 per year for every man, woman and child in the country.
Of course, it’s not only the council workers’ pensions that are haemorrhaging money. The pension schemes for the NHS, the defence forces, and the particularly gold-plated pension schemes providing teachers with over £9,000 a year in retirement, are all as leaky as an old sieve as well.
A 25-year-old worker in a private sector company would have to pay 25% of her salary into a private pension, in order to achieve a similar pension income to a council worker or public sector employee.
No wonder the final salary pension scheme is rapidly approaching extinction, with over 90% of them already closed to new members.
Do you have a view on what went wrong with the pensions industry – or have you found yourself struggling with a pension that was a fraction of what you expected? Tell us about it here!
