Hutton interim, report published

Former Labour Government Work and Pensions Secretary, John Hutton who chaired the Commission on Public Sector Pensions opublished his interim report today 7th October.

A summary of the options put forward by the 176 page report is shown below or click for the FULL REPORT (PDF 3.29MB).

Summary of short term options

The current structure of public service pensions is in need of reform to meet concerns evidenced in this report, in particular on sustainability, fairness and productivity.

However, such reform will take time to implement and to take full effect. Increased longevity, the imbalance between employer and employee contributions and the fact that total contributions may be too low if the discount rate is too high, suggests there is a case to make short-term changes, pending more fundamental redesign of schemes.

There must be proper protection for accrued rights. Therefore changing the benefit structure is not a viable option for making short-term savings.

There is a rationale for increasing member contributions to ensure a fairer distribution of costs between taxpayers and members. However, the Commission does not believe it would be an appropriate short-term measure to introduce member contributions for the armed forces at this time.

It is a matter for the Government to decide the manner and level of any increases in contributions necessary.

However, they should have regard to protecting the low paid and to the possibility of significant increases in the number of employees opting out of schemes and should consider staging increases in contributions where appropriate, to minimise this risk.

Summary of long term options

The current public service pension system has been unable to respond flexibly to changes in demographics over the past few decades and the need for greater mobility between the public and other sectors.

This system has led to disproportionate benefits for some - high flyers accruing more generous levels of benefits than low flyers - and an unfair division of costs between the employer and the employee.