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Pensions report is causing controversy, but is there really any alternative?

11 March 2011

Lord Hutton has published 27 recommendations in his new report on public sector pensions. This follows his interim report in October 2010 which concluded that public service pension schemes were too expensive and unsustainable. The proposed changes are intended to simplify the schemes, be fairer to those on low and moderate earnings, and address socio-economic changes.
Hutton advises that final salary public sector pensions should be phased out by 2015 and replaced by a new career average scheme to make the cost of providing those pensions more affordable. He also proposes increasing the normal retirement age for public sector schemes to 65, rising eventually to 68, in line with proposed reforms to state pension age, and building ‘automatic stabilisers’ into new schemes so members either increase their contributions, or take a smaller pension.

There have been warnings that if the proposals are implemented, the lowest paid civil servants will drop out of public sector pension schemes and there will be wide-spread industrial action. It is uncertain at present whether Hutton’s proposals will be adopted by the government; what is certain is that many people will be keeping a close, critical eye on what happens next.

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