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

Part 1. Key features and benefits of the six schemes

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Part 1. Key features and benefits of the six schemes

Key messages

• Pension schemes have a long history and reflect the different needs of their employers and members. Employers currently pay contribution rates of between 11.5 and almost 25 per cent of pay to meet the expected long-term cost of the schemes. Employees’ contributions vary but on average are around one third of those of the employer. To some extent, higher contributions reflect higher levels of benefit agreed at UK level. But there is no clear rationale for some of the variation in contributions among schemes.

• Pensions are earned according to pay and length of service, and many pensions are low, reflecting relatively short service, low pay or a combination of both. For example, the £4,754 average pension in the LGPS is less than half of the £10,220 average in the teacher’s scheme. There are also some differences in entitlement among the schemes.

• The average pension for women in the six schemes is about half that for men. This is because current women pensioners had shorter lengths of service than men and were paid less. For example, in the teachers’ scheme the £9,600 average pension for recently retired women is below the £13,700 average for men. Around half of the difference is due to shorter service, the rest reflects lower pay.

• Final salary schemes better reward employees with higher pay progression compared to those on low pay with less pay progression. While currently only two per cent of pensioners receive £30,000 a year or more, their pensions represent around 11 per cent of all payments. Some of this difference is the result of longer service and higher pension contributions.

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