Hutton: the devil will be in the detail

Hutton: the devil will be in the detail

The final report from the Independent Public Service Pensions Commission (the Hutton Commission) was published on 10 March 2011.

Hutton’s main recommendations are:

  • public sector workers should be moved to new career average pension schemes for future service
  • normal pension ages in new schemes should be increased to 65 and linked to subsequent increases in the State Pension Age
  • there should be a fixed cost ceiling on the proportion of pay that public sector employers contribute to employees’ pension benefits
  • there should be tiered contribution rates with higher earners paying more
  • pension benefits already built up must be honoured in full

There is not enough detail on what any new schemes might look like to say what the impact would be on Prospect members. It is entirely possible, for example, that many members could benefit from moving to a career average structure that incorporates earnings increases during accrual. Neither is it clear how many of the Commission’s proposals the Government will seek to implement.

In its submissions to date Prospect has been adamant that any reforms have to be negotiated and ultimately subject to members’ agreement. We have also emphasised that because public sector pensions are sustainable as a result of previous reforms that were implemented only a few years ago, any negotiations must be about modernising benefits rather than cutting the value of the schemes to members.

Clearly Hutton’s report will form the basis for vital negotiations on public service pension benefits. Prospect will play a full and constructive role in these negotiations and will keep members fully informed on progress. It is extremely unfortunate that the Commission’s report and negotiations with trade unions have been pre-empted by earlier Government announcements of a 3% increase to member contributions and a significant cut in benefits through linking pension increases to CPI rather than RPI.

Members will undoubtedly have many questions about the potential implications of today’s report. Queries can be directed to [email protected] (though please note that it may take our pension experts some time to respond due to the anticipated volume of questions).

It is important to note that no decisions have been taken today. Public sector pensions will undoubtedly be subject to intense scrutiny and difficult negotiation in the next weeks and months. That is why it has never been more important to be in a trade union or to recruit colleagues to Prospect.

Prospect's news release is here