PUBLIC-SECTOR workers are set to retire on incomes of nearly six times those in the private sector, according to new research which reveals the extent of Britain’s pensions apartheid.

An NHS doctor with a full 40 years’ service can expect a pension of £45,451 a year, according to the study from adviser Hargreaves Lansdown. A teacher can expect £28,518 a year. In contrast, the typical private-sector worker in a defined-contribution scheme will retire on just £7,675.

Some private-sector workers enjoy final-salary pensions that are just as generous as those in the public sector, of course, but they are a dwindling band: just 17% of workers in the private sector are members of a final-sal-ary scheme compared with 34% in 1997, according to the Office of National Statistics.

The research was released as figures showed the future cost of public-sector pensions has soared by £25 billion to £1 trillion. Each taxpayer will have to fork out more than £1,000 to provide the gold-plated retirement deals of civil servants and 5.7m other state-sector workers – even though many of their private pensions could do with the boost that cash could provide.

Now that about four in five private-sector final-salary schemes are closed to new members, the majority of workers are in defined-contribution plans funded by their own contributions and those of their employers.

The average contribution rate (paid by employees and employers combined) into a plan of this kind is 10.3% against an average of 28.7% into final salary plans.

Contributions at this level would provide a retirement income of just 23% of final salary and would need to jump to 30.3% in order to provide the two-thirds of final-salary pension payout that most public sector workers receive.

And even then you would have to save at that rate continuously from the age of 25 to 65.

Advisers say the best way to increase retirement income is additional private pension plans.

However, the average pensioner now receives just under £3,000 a year from his or her private pensions.

Laith Khalaf at Hargreaves Lansdown said: “Unless private pension savings increase significantly, the average private-sec-tor worker is likely to suffer a significant drop-off in lifestyle at retirement.”

The reason that private-sector workers are being left to foot the bill for public-sector pensions is that some of the schemes are largely unfunded, which means there is no pool of assets put aside to provide benefits in future years.

The cost of providing those benefits will therefore fall on future public-sector employees, employers and the taxpayer.

Khalaf said: “The public sector has slowly begun to use more realistic assumptions when reporting their pension liabilities, bringing them in line with calculations in the private sector.”

One set of public sector workers whose pension provision regularly comes under scrutiny is MPs. However, while their scheme has a very high accrual rate, it only accounts for a tiny proportion of the overall public-sector pension liabilities.

The latest figures show the deficit in the MPs’ pension as £49.5m, compared with the government’s 2005 estimate of total public-sector pension liabilities of £530 billion. And calculations by independent analyst Watson Wyatt and the Institute for Economic Affairs put the current figure closer to £1,000 billion.

Little wonder then, that there have been calls to change the pension plans for public-sector workers to defined-contribution schemes.

The average pension fund used to buy an annuity last year was approximately £33,500, according to the Pensions Policy Institute. This would buy a retirement income of just £1,380 a year for a male aged 65.

If you wanted to retire on two-thirds of final salary, you would need to increase typical contributions from £833 to £1,940 – difficult in the today’s climate where everything from fuel to food bills are rising.

If you are concerned your pension provision will fall short, the best idea is to approach an adviser to work out how much you can afford to set aside.

Khalaf said: “We have a pensions calculator at h-l.co.uk that lets you pop in your current pension contributions and calculate what you stand to get as a retirement income. If you stand to fall short of your goal, you can use a private pension to help you to make up the difference.”

Thankfully, rules introduced in April last year have made it easier to put large amounts into your fund. You can now invest an amount equivalent to your annual salary, or up to £245,000 this year, whichever is lower, which means many high earners have been able to plough bonuses into their schemes.

The maximum amount you can contribute over your lifetime and still benefit from tax relief is £1.75m for the 2009-10 tax year.

If you have access to a company scheme, and your employer makes contributions, you would be mad not to join it. If there isn’t a company pension where you work, you can either opt for a personal pension, such as a stakeholder plan, which will have charges capped at a maximum 1.5%, or a self-invested personal pension (Sipp).

Tom McPhail at Hargreaves Lansdown said; “If you are going for a stakeholder, I like Axa Sun Life’s plan and its Retirement Distribution fund, and the Scottish Widows stakeholder, as it offers the Schroder Managed fund.

“If you are considering a Sipp, then low-cost plans can be started with as little as £50 a month, so they definitely aren’t just for the wealthy. But you need to be comfortable making investment decisions and engaged in where your money is invested.”

Since the introduction of the new pension rules, members of company schemes can now also contribute to personal pensions, including Sipps, while remaining in their employer’s scheme, so this can be an effective way to make extra contributions.

Remember, too, that there are other ways to save for retirement, such as Isas, which are less restrictive than pensions.

Times Recommends

• How to sell your home in a downturn
• How to boost your spending power
• Unemployment benefits explained