Pension evaluation in the public sector

This research was undertaken by researchers at the University of Sussex and the National Institute of Economic and Social Research using administrative data made available via the Office for National Statistics (ONS) Secure Research Service (SRS), which is being expanded and improved with ADR UK funding.

This research was led by Professor Peter Dolton, and compares and measures Total Reward over the lifetime and compares it in different occupations within the public sector. Data from the Annual Survey of Hours and Earnings, Labour Force Survey, British Household Panel Survey, and English Longitudinal Survey of Ageing was combined with a rigorous new economic theory to solve a practical recurrent problem in public sector pay evaluation. 

Research findings illustrated that public sector workers are, on average, worse off in the recently introduced Career Average (CARE) Pension schemes. However, the average masks substantial occupational variation: those in the Prison Service, Teaching and NHS Nurses schemes, although still adversely affected, are less so than other groups. This research also found that doctors are also substantial losers in the move from Final Salar to CARE schemes. 

The Police and Fire Services are much worse off. This research shows between £300k and nearly £500k 'lost' by the current CARE scheme members relative to their older counterparts in the Final Salary pre-2012 scheme. This analysis makes clear how these larges differences occur due to changing retirement ages and accrual rates.

Female teachers and doctors fare better under the CARE pension reforms than their male counterparts. When a comparison is made between public and private sector counterparts of directly comparable groups (such as teachers and nurses), it is shown that the public and private sector workers are in fact slightly better off in terms of Accumulated Lifetime Total Reward (ALTR) levels.

This research will inform future discussions about:

1. The consequences of recent pension reforms and how this could determine future pension changes.
2. How pay and pension comparisons might be made in the future.
3. The extent to which specific occupations have been affected by recent CARE pension changes and whether this needs to be tackled.