Public sector pension

Public sector pensions are pensions received by civil servants or employees of government departments.

Public sector pensions have traditionally been seen as generous in that many of them provide an income equal or close to an employees’ final-salary amount. Historically this has been seen as a way of making up for salaries that were often lower than those received by employees in similar jobs in the private sector.

However, in March 2011 Lord Hutton completed his review of public sector pensions against a background of public sector cuts set out by the coalition government as it tries to reduce the public sector deficit.

Lord Hutton concluded that public sector pensions should be based on average earnings throughout a career rather than final salary amounts. This reform attempts to make public sector pensions more affordable and sustainable for the taxpayer.

The government can choose to follow these recommendations and if it does the reforms could be in place by 2015.

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