Private versus public sector pensions – how to avoid a race to the bottom: this is the Money podcast
Of all the tax rise ideas in Rachel Reeves’ ‘almost no options’ budget, one stood out for the extent to which it was shot down: charging employer national insurance on pension contributions.
The row over taxing workplace contributions to our pension pots gained momentum this week as it emerged that part of such a plan would involve reimbursing public sector pension schemes for the extra costs.
This would leave only private sector employers exposed, potentially impacting their employees’ pensions and leaving taxpayers to foot the bill to protect more generous public sector schemes.
Hopefully this plan – called ‘disastrous’ by pensions campaigner Ros Altmann – has now been shelved, but it raises another important question: how do we prevent a race to the bottom on pensions?
Public sector pension schemes are much more generous than their private sector equivalents, but the answer is certainly not to reduce the former either, but to increase the quality of the latter.
On this podcast, Georgie Frost, Lee Boyce and Simon Lambert discuss the difference between public and private sector pensions – and how we can try to improve rather than damage our retirement savings.
Also in this episode, the two sneaky taxes Lee hates, is it worth it for a 39 year old to get a lifetime Isa before it’s too late, and is Goldman Sachs or Santander right with substantially different interest rate forecasts – and what does it mean? means for your mortgage?
And finally, where are Britain’s new property hotspots and why have things changed dramatically in some areas?
In private sector defined contribution plans, money is deposited by employers and employees and invested to build a pot; in the public sector, contributions are higher, but the employer guarantees an income upon retirement; in the teacher scheme this amounts to 1/57th of the average career salary for each year accrued.