It has been revealed that public sector workers are receiving massive benefits over private sector workers with regards to national insurance contributions and pension arrangements. This figure has been calculated at some £50,000 over the span of a normal working life and is sure to cause massive resentment in the private sector.
As has been widely covered in the media, the majority of private sector final salary pension schemes have been closed due to major future funding concerns. This has resulted in many schemes referring back to money purchase pension arrangements which offer much lower pensions than their final salary equivalents.
When you add in the fact that public sector workers (state employees) are still enjoying lucrative index linked final salary schemes, funded by the tax payer to the extent of £1 trillion, it is easy to see why concerns are growing. Private sector workers are further disadvantaged by the fact they are not able to take their pension until aged 65, against 60 in the public sector. It must surely just be a matter of time before there is a legal challenge to this anomaly?
There have also been major changes in national insurance payments over the last few years, due to the complicated opt out, opt in situation. This has resulted in private sector workers paying more in national insurance than there public sector counterparts.
Recent information released by the Treasury (under the freedom of information act) has also highlighted the warnings which the Chancellor ignored prior to his tax hit on pension funds some 10 years ago. Many blame this for problems with private sector pension arrangements, and the reduction in future pensions for many.
Will the situation ever be rectified?
For many years we have seen consumers place great trust in the so called Best Buy tables in many of the financial magazines. While they do offer a summary of the best offers available at the time, many in the industry have great reservations. Do all companies have the same access to these lists? Maybe not…
Insiders in the industry claim that:
- Many financial product providers introduce short term incentives in order to climb up the tables.
- Many magazines charge upwards of £10,000 to appear in their Best Buy tables.
- The larger companies are able to negotiate better deals in exchange buying additional advertising space.
Even though the concerns of market insiders seem to carry some weight, this is not the end of the world for the consumer. Thanks to the internet it is now much easier to gain access to all offers in the market place, with many sites offering unbiased Best Buy tables. The vast array of financial forums, blogs and information portals ensure that the best offers will always rise to the top, although consumers should always check that any financial product is appropriate to them.
The internet has created a transparency which has been missing for many years, a market place which while heavily dependent upon advertising income also offers the consumer genuine input with feedback and comments.
The market place is so competitive that advisers cannot afford to alienate customers by being anything but transparent, otherwise they will lose business in the long term.