UK. Inflation sparks a new era of pensions inequality
The generosity of public sector pensions was a compensation for low salaries. However, this gap is narrowing.
The average worker in the private sector earned £622 a week in the year to August, according to an IDR analyst. The average public sector worker, excluding those who worked in finance, earned £593.
Former public servants will also enjoy two layers of taxpayer-funded inflation protection next year, assuming the “triple lock” state pensions are maintained. The policy pledges to increase the state pension every April in line with last September’s highest inflation, and wage growth or 2.5%.
Experts have warned that the millions of savers who rely on “defined contribution” pensions – which invest your savings over the course of your working life – are more vulnerable to the double whammy of inflation and stock market volatility. The average private pension of £9,724 per year would lose nearly £500 of its purchasing power over the next 12 months, even when assuming a moderate level of investment growth.
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