Government responds to interim Hutton report

In the Comprehensive Spending Review (CSR)published on 20th October the Government responded to the interim report as follows:

The Independent Public Service Pensions Commission (IPSPC) led by John Hutton published an interim report on 7 October. The report highlights the importance of providing good quality pensions to public servants, rejects a race to the bottom in pension provision, but concludes that there is a clear rationale for public servants to make a greater contribution if their pensions are to remain fair to taxpayers and employees, and affordable for the country. The Government accepts these conclusions. In response to the Commission’s interim recommendations, the Government will:

• commit to continue with a form of defined benefit pension;
• await Lord Hutton’s final recommendation before determining the nature of that benefit and the precise level of progressive contribution required;
• carry out a public consultation on the discount rate used to set contribution rates in the public service pension schemes;
• implement progressive changes to the level of employee contributions that lead to an additional saving of £1.8 billion a year by 2014-15, equivalent to three percentage points on average, to be phased in from April 2012;
• exempt the armed forces from this increase in employee contributions;
• launch a consultation on the Fair Deal policy, which Lord Hutton noted can create a barrier to the plurality of public service provision and make it more difficult to achieve innovation, to report by Summer 2011, informed by Lord Hutton’s final recommendations on structural reform; and
• seek engagement with all stakeholders including trade unions