Hutton's recommendations call for greater pension contributions

A new report by former Labour minister Lord Hutton, has recommended that six million public sector workers make a greater contribution to their pensions as well as calling for the end of final salary schemes and raising the retirement age for public sector pensions in the longer term.

The peer was asked by the coalition government to conduct the inquiry and his report says that some public sector schemes are completely out of step with life in the 21st century, especially as some people now spend as much as 40% of their life in retirement.

Now Chancellor George Osborne will decide how much more public sector workers will have to contribute to their pensions schemes with a decision expected in the comprehensive spending review on October 20. Lord Hutton said that the only way to raise money immediately was to raise contributions, although the final salary schemes and the pensionable retirement age will have to be fully considered at some stage.

He said that there is now an unhealthy divide, with current public sector workers able to retire at 60 and new entrants working until they are 65. He also criticised final salary schemes, saying they are unfair to the majority and can lead to high flyers getting almost twice as much as those on more modest earnings.

TUC general secretary Brendan Barber responded to Lord Hutton’s proposals, by highlighting the current situation facing public sector workers. He said: “Public servants are facing a pay freeze, are in fear of their jobs and working harder to cover staff who have not been replaced. Throwing in worse pensions in retirement and reduced take home pay at a time when inflation is regularly busting the Bank of England target adds up to a toxic cocktail. As Britain's bankers get back to bonuses as usual, ministers should not be surprised at an angry reaction.”