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Pensions based on career average earnings will be fairer to the majority of members that do not have the high salary growth rewarded in final salary schemes
Lord Hutton
Public sector workers could lose their final salary pensions following proposals from Labour cabinet minister Lord Hutton.
The final report of the government commissioned Independent Public Services Pension Commission, chaired by the Blairite former defence secretary, concludes that final salary public service pension schemes should be replaced by a system where an employee's pension entitlement linked to their career average earnings.
Lord Hutton, who has been criticised by some former Labour colleagues for working with the coalition, said the proposals struck a balance between public service workers and the taxpayer.
“They will ensure that public service workers continue to have access to good pensions, while taxpayers benefit from greater control over their costs,” he said.
"Pensions based on career average earnings will be fairer to the majority of members that do not have the high salary growth rewarded in final salary schemes.
He added: "The current model of public service pension provision is clearly not tenable in the long-term.
But public sector union's have attacked the idea that receive excessive pensions and have warned scrapping final salary pensions will cost low paid workers thousands of pounds.
A spokesman for Unison said: "Over the past few months, many commentators and politicians have increased their attacks on so-called gold-plated public sector pensions.
"These challenges are designed to pit public sector workers against private sector staff, sparking a race to the bottom, and could mean poverty in retirement for all.”
They added: "On average, local council workers can expect a pension of £4,000 per year, with women getting just £2,600.”
And the Unite union has warned that the coalition will 'cherry pick' Lord Hutton's report to "fit its own right-wing agenda".
Unite Assistant General Secretary, Gail Cartmail said that while she welcomed some aspects of the report it could be marginalised by what the coalition is "cooking up" to hit public sector pensions.
She said: "The fear is that Lord Hutton's report will be cherry-picked by ministers for those recommendations that dovetail with their menu of radical measures that will hit the living standards of not very well paid public employees extremely hard in their retirement. Recommendations that could be favourable to employees will be simply discarded."
But speaking on Radio 4's Today programme this morning Hutton denied it was a race to the bottom and said he did not want to "hack away" at the value of public sector pensions.
He said the biggest risk to pensions was rapidly rising life expectancy and the current scheme was "heading for the rocks".
"I want to make sure we can deliver adequate good quality incomes on a sustainable basis," he said.
Hutton served as a cabinet minister under both Tony Blair and Gordon Brown. He quit the cabinet in 2009 at the same time as other members of the Labour Party attempted to oust Brown from Downing Street. He stood down as an MP at the 2010 general election.
Article Comments
Hutton's report is a typical socialist world view that energy, initiative and success should be penalised.
C. Sworder
10th Mar 2011 at 6:52 pm
Does this government really want a Dad's Army of policing? Whilst experience counts, the dangers for the public of sending in 60-year old police officers to deal with public order situations and Friday night drunken brawls seems obvious.
We have yet to meet with the Home Office to discuss the specifics of what officers will be expected to pay, but let's not forget we already had changes to the police pension scheme in 2006. To that end, officers are already expected to work longer and receive less.
Simon Reed, vice chairman, Police Federation of England and Wales
10th Mar 2011 at 3:57 pm
Lord Hutton's review of public service pensions has never been about making the schemes sustainable or viable. They already are.
Lord Hutton has allowed himself to legitimise the intention that the coalition government has had from the outset: to raid public service pensions.
These recommendations have set the wheels in motion for an additional, unjustified tax on public service workers.
Chris Keates, general secretary, NASUWT
10th Mar 2011 at 1:34 pm
Hutton recommends a move away from final salary to career average pensions. The government will try to use this proposal as another cost-cutting measure. They know that there are already good quality alternatives in place.
Hutton recognises that any career average schemes should not be linked to CPI inflation because it would destroy their value. The government cannot be trusted on these issues. Promises to protect accrued rights have already been broken.
Christine Blower, general secretary, National Union of Teachers
10th Mar 2011 at 1:33 pm
Lord Hutton had a real chance to make sure low paid public sector workers have good quality, affordable pension schemes; but in failing to address the key issue of affordability to members, that chance has been wasted.
Hutton's new report has ignored some of the most important responses to his interim report and hasn't fully taken account of recent government policy changes on contributions and index linking.
As a result, many of his conclusions are questionable and will infuriate public sector workers. It's not cogent enough to be a blueprint for reform but it might well light the blue touch paper for industrial action.
Brian Strutton, national secretary for public services, GMB
10th Mar 2011 at 10:34 am
Lord Hutton had already recognised in his interim report that public sector pensions are not gold plated- the average local government pension is just 4,000 pounds-a-year and a part-time female NHS employee can expect an average of 2,500 pounds-a-year.
However, this report only gives an outline of future pensions and its impact will be shaped by what the coalition is concocting to hit public sector pensions.
The fear is that Lord Hutton's report will be cherry-picked by ministers for those recommendations that dovetail with their menu of radical measures that will hit the living standards of public employees extremely hard in their retirement. Recommendations that could be favourable to employees will be simply discarded.
Gail Cartmail, assistant general secretary, Unite
10th Mar 2011 at 9:57 am
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