By Julian Knight BBC News Online personal finance reporter

The mass closure of private sector final salary pension schemes has put public sector workers at the top of the pay and benefits ladder for the first time, BBC News Online research reveals.

Public sector pay and pensions are the hot topics of the moment.

Public sector unions claim that their members' pay needs to be increased sharply to match private sector salaries.

As a result, pay disputes are rumbling throughout the public sector - London-based teachers and local government workers have recently taken industrial action.

Without it many public sector workers would retire to poverty relying on the taxpayer. Glynn Jenkins, head of pensions, Unison

And, of course, there are the firefighters.

But pay is only part of an employment package, as the recent spate of final salary closures have illustrated.

While workers in the commercial sector earn better salaries than public sector workers, the replacement of final salary company schemes with often inferior money purchase schemes has had a big impact on their overall pay and benefits package.

It has gone so far, according to BBC News Online research, that the traditional gap between public and private sector pay and benefits have been reversed for the first time.

In fact, a typical public sector worker is now �203 a year better off, because private sector pensions have been cut from 20% of salary to 12%.

And new company recruits - those most likely to be shunted into money purchase schemes - face the biggest pension losses.

But these cuts have not been mirrored in the public sector.

Growing gulf

Since June, final salary pension schemes have been closing at twice the rate of last year.

Just under half of all final salary schemes run by private sector employers surveyed by the Association of Consulting Actuaries are now closed to new entrants.

Final salary schemes, which guarantee a pension income equivalent to a fixed proportion of the employee's final salary, are usually more generous than money purchase schemes, which are affected by falling stock markets.

Reversal of fortune

According to the 2001 National Association of Pension Funds (NAPF) survey, final salary schemes pay approximately 19% of salary in the public sector, and 20% in the private.

Employers have not only been closing final salary schemes, but have also been cutting their contributions.

This means the combined employer and employee contribution to schemes has fallen to 12% of salary.

The reduction in contributions has moved public servants into pole position overall.

It is possible that long term the scenario currently playing out in the private sector could move to the public sector, David Astley NAPF director of benefits

Public sector employees earn on average �23,271 a year, just below the �24,544 that private sector workers are paid, according to the 2002 Office of National Statistics (ONS) earnings survey.

But factor in an averagely-funded public sector final salary scheme rather than an averagely-funded private sector money purchase pension, and the income table turns.

Public sector workers edge into the lead by �203 a year.

'Gold watch'

In truth, many private sector employees could be forgiven for licking their lips when looking at schemes available to public sector workers.

Police employers, for example, pay 21% of salary into the forces pension scheme - allowing many officers to take early retirement.

As for firefighters, their pension scheme allows retirement at 50 - a full 15 years before most workers get to collect their gold watch - and pays a 60th of average salary for each year of service.

MPs have the best public sector pensions of the lot - with even humble backbenchers building up a pension of one 40th of salary for each year sat in the House.

King's ransom

However, for certain public servants the prospect of a final salary pension will be a small comfort for low wages.

Glynn Jenkins, head of pensions at public sector trade union Unison, says government employees' pension arrangements alleviate some of the burden on the public purse.

"Without it, many public sector workers would retire to poverty relying on the taxpayer."

Even with final salary schemes, Mr Jenkins added, the average local government worker retires on a pension of only �3,800 a year.

But public sector schemes offer greater security, says David Astley, the NAPF's director of benefits.

Mr Astley told BBC News Online: "Ultimately, they are backed by the tax payer, whereas if a firm operating a final salary scheme goes to the wall then, as we have seen recently, some scheme members can lose a significant part of their benefit."

Achilles heel

But public sector workers' new status may not last long.

They may find that their pensions go the same way, as their private sector counterparts'.

The public sector pensions' ultimate reliance on the taxpayer could prove to be their Achilles' heel.

Pension may be future battleground

Already, many public pension schemes are creaking under the pressures of the weak stock market and high levels of early retirement.

And if it comes to a choice between raising taxes to support public pensions, or changing the way they operate, Mr Astley believes public employees could lose out.

"It is possible that in the long term, the scenario currently playing out in the private sector could move to the public sector," Mr Astley said.

And with the office of the Deputy Prime Minister John Prescott now looking at the future of public sector pensions, workers may in future be taking to the picket lines not for higher pay, but to protect their pension advantage.

Your Comments

I work in the health sector. I'd like to meet some of these "average earners" on �23,000. I earn less than �14,000, and there are certainly managers and lecturers on less than �23,000. We are expected to work evenings and weekends as standard (not overtime). Getting it easy? Don't think so.
Graham Gamblin, UK

A fireman retiring aged 50 with 30 years service would receive an index linked pension of approx �11,000 pa with a capital value of about �300,000 . With the mooted increase of 16%, this would rise to nearly �350,000. Other than some directors' schemes, this generosity is unmatched in the private sector.
Paul Phillips, England

So there we are, in the not-too-distant future, public sector workers will not only get low pay but low pensions too. The country apparently wants first-class public services. but what's the old adage about what happens if you pay peanuts?
pip, UK

I've been in the public sector for the last 35 years and all that time suffered low wages while people in comparable jobs have had company cars, private health schemes and annual bonuses. My work has been socially beneficial and I've tolerated the pay gap because I've enjoyed my work and also because I've enjoyed working for the benefit of society. I retire in a few years time on 50% of my still too low salary. Lets not make too much of this issue - over the years people in comparable jobs outside have huge houses, large company cars and have had continual expensive foreign holiday. So, the good life isn't so good for them when they retire? Well its swings and roundabouts as far as I'm concerned and yet I still doubt my allegedly generous pension will make up for the years and years of low pay preceding it.
Tom Cunliffe, UK

Nobody ever seems to mention civil servants when public sector pay is on the agenda. We are poorly paid and our pension scheme has already been downgraded - new entrants are now asked to pay twice as much for virtually no extra benefits.
Ben, UK

As a public service worker I am getting my pension after 25 years service. I retired early (56) after a heart attack. I chose this job partly because of the pension and the reliability of employment. In the private sector, many employees retire with no pension after shifting from job to job. Many employers loose their staff after nearly two years to avoid putting them on a pension and most private employment is unreliable because of bankruptcy or employers selling up. I think that for the private sector an independent portable pension is the best choice. How many private sector employees have regular work with one employer for 30 years and get a full pension? Not many. Many public employees are also not in the public sector for 25 years and most people do not get the full pension.
Chris, UK

Public sector employees already enjoy unprecedented job security not afforded to private sector employees. If the company goes bust, I am out of a job. What is even worse is that government (public sector) incompetence is one of the root causes for many private companies going bankrupt in the first place. We have far to many public sector workers in Europe, in particular the jobs worth buerocrats who contribute nothing to society.
Garry S, Germany

How do your "average public" and "average private" change if you take out the top and bottom 10% -so you have an average "normal wage" in both cases? I tend to think that inequalities are greater in the public sector, as surprising as it may sound.
Felipe, UK

Having contributed to both, no I don't think public sector workers have it easy. I'm ex-RAF and when you listen to the press, you would think that we get our pension for nothing, whereas the truth is that the Armed Forces Pay Review Body always took the value of our pension in to account and adjusts accordingly (always downwards). If the government scraps these pensions, it will mean that they have conned people in to taking lower pay over the years. It�s just a pity that our beloved government can not be investigated by the FSA.
Chris, UK

When compared to what Ford are doing for their workforce, I don't think anyone else in the country is getting a fair deal, particularly the public sector. Changes have been made to the pensions there including resulting in the employee having to pay more for less. I think it would be interesting to find out how many employees in the public sector are entitled to WFTC due to their low wages?
Ann, UK

The main "benefit" of working in the public sector tends to be the relatively tolerant approach of employers to things like sickness or maternity leave. Job security and decent pensions are a compensation for relatively low pay, lack of bonuses, etc. However, not all public sector workers get these benefits- many are on short-term contracts, and many job vacancies are left unfilled for long periods of time, leaving others to pick up the slack. Overall, the public sector is a good place to work in Scotland, but probably less so in an expensive city like London.
Steve , Scotland

My employer gives me a paltry 5% contribution to a money-purchase pension and an "average" salary. I think it's a disgrace. Our managers, who are on almost double "average" salary get a 10% pension. To me this seems preposterously iniquitous. Government should legislate for a 10% minimum employers contribution across the board and no way out. That would level the field a bit.
Rob Moore, UK

Workers in the private sector are trebly disadvantaged compared with public sector workers. First, in the private sector we have one absolute measure � profits. If profits are not made, or even not the appropriate level of profits; jobs are lost. Second, private sectors tax and their company tax pay the public sector; who seem to view this as a bottomless pit. Third, there is no job security in the private sector, unlike the public. When market disciplines are introduced to the public sector they scream about wage cuts and requirements for higher productivity. The private sector has been facing these demands for years. Finally, can someone explain why, when the Government is saying that it cannot afford public service pay demands MPs get such high salaries, allowances and benefits; including incredibly expensive pensions; and a lot of them have second jobs. The Government points out that there are many applicants for each fire-fighters jobs there are even more applicants for MPs jobs. Again, all paid for our of private sector taxes.
Ian Davidson, UK

Why should those in the private sector, who have seen the value of our pensions fall substantially in value, provide guaranteed final salary schemes for the public sector. It is just another example of the government milking us for taxes and offering nothing in return.
Jon , UK

Nice for the MP's- but it all sounds a bit like propaganda- not many people spend 40 years in the same job these days- not even public sector workers. Also with the recent history of pension fraud/mismanagement will the funds really be there in 20 years time let alone 40?
al, UK

When comparing the average pay of workers in the public and private sectors, are we looking at the same work? Many lower-paid jobs that used to be in the public sector are now privatised, so a simple comparison of average pay is potentially misleading.
Ian, UK

I am disgusted at the way the media are whipping up enthusiasm for cutting public sector pensions. Examples often used are police and fire brigades, the pensions based on 60ths and retirement after a max of 30 yrs of service or at age 50. Local government workers pensions certainly in Scotland are based on 80ths of salary, with a retirement age of 60. Much is made of employers contributions now, but nothing is said about the holidays employers took in the 80's, paying in nothing whilst the employees have consistently paid in their 6%. I would count any attempt to alter my pension rights as a breach of contract.
, Anon

At last its been mentioned The fact is if you look at the total packages between public and private sector it is the public sector that is better off and this has been the case for years!! The whole package includes holidays, hours worked, overtime rates (quite often not paid in private sector at all) likelihood of redundancy, pensions and actual retirement age. If it is so good in the private sector then why do public sector unions resist private sector terms and conditions They cant argue it both ways!!!!!
Martyn, UK

I work in the pensions industry and it is a well known fact that if you want good pension provision you should either be a company director or work in the public sector. Many private sector employees, myself included, receive no pension scheme benefits from my employer. The sooner this changes the better.
Gordon Sinclair, England

The time's come for MPs to be exposed to the same market risks as everyone else. Members of Parliament enjoy too many 'perks of office' at the tax payers expense. I'm not saying that office shouldn't carry some perks, just that a more palatable balance should be found, they should be exposed to the same risks as the public that employs them.
Roger, UK

How ironic that pension losers in the private sector are, through taxation, funding a comparative pensions extravaganza in the public sector. As an ex-civil servant, and with friends who work for Leeds council, I am only too aware of the profligate inefficiencies inherent in the public sector. Roll on the day when public services in this country are managed with the same rigour as the City expects of a Footsie company.
William Bell, Leeds, UK

Terrible. The country is being destroyed by an government devoid of any responsibility to the higher tax payers.
Patrick Mewton, London

Recent troubles have exposed the folly of gambling peoples long term financial security on the vagaries of the financial markets. A more stable system is required, and I fear that this will cost more for employees and employers alike. To those who squawk on about "I don't see why I should subsidise...." I say: empty your own bins ,catch your own burglars, put out your own fires and educate your own kids for a month, then tell me what is worth "subsidising". Take out your anger on your greedy employers rather than on public servants. They are your servants and not your slaves, so show them some respect.
Rodger Edwards, UK

I used to work for a large petrochemical company I enjoyed a non-contributory pension scheme based on 1/60 this and staff retired at 55. I now work in the public sector with a contributory 1/80th scheme and retirement at 65. Featherbedded in the public sector? What do you think?
Kevin Thompson, England

The civil servants also benefit from job security not offered to anyone else. I have twice worked within the service (the second time as a contractor) and I could see the relaxed, unpressured, stress free atmosphere that they work in. We all choose where we work and all factors (pay, pension, stress and security) form part of the choice.
Nigel, UK

While many people still think that public sector workers seem to be hard done by, there are many millions of private sector workers on very low pay also. We are not all highly paid corporate executives and also run the risk of increased job insecurity and, certainly, in the vast majority of small companies, NO pension. I wish public sector workers would stop whining and be thankful for what they have.
Jonathan, UK