The cost of public sector pensions in Scotland Prepared for the Auditor General for Scotland and the Accounts Commission


Individual pensions vary significantly across schemes and according to individual circumstances



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Individual pensions vary significantly across schemes and according to individual circumstances

24. Pensions are generally based on individuals’ length of service and final salary. On average, pensioners in the police and firefighters’ schemes receive higher pensions while in all schemes men generally receive higher pensions than women (Exhibit 3). This variation reflects differences in pay and reward and in the proportion of employees working reduced hours within each occupation and sector. It also reflects the shorter average working lives of women in recent years and any previous pay inequality.

25. In addition to the annual pension, pensioners also receive a one-off, tax-free lump sum payable on retirement. The amount of lump sum depends on the length of service and final salary. It used to be an automatic amount according to individual scheme rules. However, following the Pensions Act 2006, there is now more flexibility and most scheme members now have the right to swap up to a quarter of their annual pension for a lump sum, a process known as commutation. The take-up rate and amounts of lump sum vary significantly (we show in Parts 3 and 4 that there has been higher spending on lump sums in all schemes in recent years).

26. The average pensions include employees who retired many years ago and therefore may not be representative of employees who are retiring now. We therefore obtained and analysed information from the LGPS and teachers’, firefighters’ and police schemes about the pensions paid to employees who have retired over the past two years (five years for teachers). This is likely to be more representative of the benefits available to pensioners retiring now and in the near future. It shows that pensions vary considerably among schemes and that length of service significantly affects the level of pension received (Exhibit 4, overleaf).




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