PM Keir Starmer: Labour has a two-tier approach to public and private sector pensions (Image: Getty)
Millions of Britons who’ve scrimped and saved over decades are now seeing the value of their retirement pots crumble.
Those in drawdown are particularly hard hit, suddenly unable to withdraw the same monthly amount without depleting their savings too quickly.
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The result? Retirement has become even more stressful and uncertain.
Sharp falls in global equity markets have shaved billions off UK pension values in just days.
It’s a punishing setback, especially after a lifetime of doing the right thing. Yet one section of society remains untouched.
Public sector workers can sleep soundly. Their pensions are protected, inflation-linked and guaranteed, regardless of what happens in the markets.
While everyone else frets about falling fund values and eroding drawdown rates, theirs are paid out like clockwork. Whatever the FTSE 100 or S&P 500 does next.
Public sector workers don't have to put up with second-rate 'defined contribution' pensions, whose value at retirement depends on stock market performance.
They’re on gold-plated 'defined benefit' final salary schemes, which are underpinned by the taxpayer.
It’s a brutal irony.
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Private sector workers are watching their retirement dreams slip away while simultaneously footing the bill to protect those in the public sector from precisely the same fate.
This is the true face of Britain’s two-tier pension system. One rule for the Labour’s favoured public sector, another for everyone else.
The hidden cost of providing these pensions is £57billion a year, according to the Institute of Economic Affairs.
That’s almost a third of the public sector payroll.
The official liability figure stands at £2.6trillion.
Public sector pension schemes are “unfunded”. The money to pay them doesn’t sit in some well-managed pot, compounding nicely. It comes straight out of current tax receipts with the honourable exception of local government pensions, which are fully funded.
Other countries, such as Canada and Sweden, have moved to funded models. Labour won’t even discuss it.
To be clear, this isn’t a swipe at nurses, teachers or firefighters. A good pension has long been the trade-off for tough jobs and modest pay.
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But public sector salaries, especially at the top, have risen fast. The pension bargain is no longer what it was. And yet the protection remains.
Meanwhile, the private sector gets one kicking after another. Gordon Brown’s 1997 tax raid on dividends devastated private sector final salary schemes.
They barely exist today. Brown didn't dare touch public sector pots, of course.
Rachel Reeves’s inheritance tax grab on unused defined contribution pensions has chipped away at the only real advantage defined contributions schemes had left.
The gap between the two systems is now so wide, it’s becoming politically toxic. The state is shielding one group of workers from risk, while exposing the rest.
When the stock market falls, so does your pension. Unless you’re in the public sector. Two-tier Keir Starmer strikes again.
