Public sector pay windfall revealed

Public sector workers saw their pay grow faster than people in the private sector in the first half of the decade, new research shows.

The earnings of people employed by the state grew by an average of 2.3 per cent a year between 2001 and 2005, compared with growth of around 1.5 per cent for those employed by private firms.

But the increase was nearly twice the rate once pension benefits were taken into account, according to the Institute for Fiscal Studies (IFS).

People who are employed in the public sector are far more likely to have access to generous final salary pension schemes than those in the private sector, where the majority of these schemes have been closed to new members, and in some cases to existing ones as well.

They are being replaced by less generous defined contribution schemes, under which the individual has to shoulder all of the risk of investment volatility and increased life expectancy.