Public Sector Pensions Explained
If you’re in the public sector or quit the public sector a few years back, you might have a public sector pension scheme. Public sector workers include:
- NHS workers
- Armed forces employees
- The police
- Civil servants
Here’s an interesting fact:
Most of the public sector pensions are defined benefits pension schemes, and almost 20% of them are unfinanced. Like all the workplace pensions, your employer sets up a public sector pension for you and the contributions made are usually take from your monthly income before it’s transferred into your account.
Defined Benefit Pensions
As mentioned, most public sector pension schemes are defined benefits pension plans. It means that the amount you’ll receive upon retiring is dependent on your final income and how long you’ve worked in your sector, rather than the amount you’ve contributed into your pension pot.
Some public sector pension plans, like the Local Government Pension Scheme1, are sponsored. However, almost 20% of these pension funds are unfinanced final salary schemes. It means that they offer you a substantial retirement income from your boss ‘current income- tax income in case you’re in the public sector – instead of putting away to cater to the pension plans.
Can You Transfer A Public Sector Pension?
The question of whether you can transfer a public sector pension is one that many potential retirees are asking. The answer to this really comes down to the specifics of your particular situation and what kind of benefits package you have with your employer.
If you are a pensioner and your employer is in the private sector, then many of these benefits will transfer with you when you retire.
How to Move A Public Sector Pension
If you have an unfinanced public sector pension scheme, as of April 2015, you’re not permitted to transfer it to another pension fund. If you’re uncertain about whether your pension scheme isn’t funded or not, you can contact your boss and the Pensions Advisory Service2. You can also visit your employer’s pension scheme website and find out if you’re included.
If you, however, have a sponsored public sector pension, you can transfer it to another pension lender of your choosing. Nevertheless, you have to receive credible financial advice from an independent source, before you move to a defined benefits pension plan that’s valued at over £30,000.
Got Questions? Check These First
Do Public Sector Workers Get the Full State Pension?
Yes, they do. The pension perks that any public servant gets generally comprises of a retirement income and a lump sum amount. Public servants in the PRSI3 class are also eligible for the state pension, but it’s subject to the rules and regulations outlined by the Department of Employment Affairs and Social Protection4 in the UK.
Is the Public Sector Pension Better Than the Private Pension?
Not particularly. As per the Frasier Institute’s records5, public sector employees enjoy several non-wage perks and are more probable to have a pension fund unlike those in the private sector (89% vs 24%). Moreover, those with a pension pot are more likely to have the defined benefits pension, which is equally incredible.
How Much Do Public Sector Pensions Cost in the UK?
Well, typically, the yearly cost of public sector pension is about €40 billion in 2020/21. That compares to, for instance, the total UK defence expenditure in the same period, which is about €40 billion.
Are Public Pensions Safe?
Yes, they’re among the safest pension schemes on the market. In Canada, for instance, the risk of a pension plan collapse like in some UK counties seems to be negligible. It’s because the pension schemes market is strictly regulated, and that leads to more conservative assumptions and practices.
The Public Sector Pension Scheme is a great way to save for retirement. It’s easy and affordable to set up an account with this pension scheme through your employer or yourself as long as you are employed in one of the participating provinces. Hopefully, these points have helped shed some light on what the PSPS entails and how it can help you retire more comfortably.