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Thursday, October 25, 2012

Spending power of state and private sector pensioners

I recently commented about the flood of new data about the effects of the recession on older people and how it impacts their spending power. It just keeps on coming. Thanks to David Metz and David Sinclair for pointing out this new research from the Pensions Policy Institute.

The primary purpose of this research is to look at the impact of the policy changes implemented by the coalition government on the pensions of those employed in the public sector (i.e. teachers, NHS staff, civil servants etc).

There are three messages that come out of this research:

1 - before the changes the level of public sector pensions were obscenely high compared to those in private sector and what the UK can afford to pay.

2 - after the changes the level of pensions is just absurdly high and still much more than the UK can afford to pay.

3 - the vast majority of employees in the private sector will receive pensions, even after these changes,  that are significantly worse than their neighbours who work for the state. As you can see the private sector pension is approx 10% of final salary compared with 15% for state employees. What this chart doesn't show is how much money state and private sector employees have to pay to receive these pensions. The answer is the poor sod in the private sector has to pay a lot more.

So what are the messages for marketers. State employees are going to be far better placed in retirement that those from the private sector. That is worthwhile targeting information.

Here is a Dick Stroud prediction - maybe it is wishful thinking. Within the next 5 years there will have to a major revision down of state employee pensions.   Dick Stroud

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