Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

Lord Hutton calls for end to final salary pensions


Public sector final salary pension schemes should eventually be scrapped and staff contributions should increase in the short term, according to an independent commission led by Lord Hutton.

In an interim report from the Independent Public Service Pensions Commission, published today, said final salary schemes should be thrown out as part of a comprehensive overhaul of public sector pensions.

Former Labour minister Lord Hutton said financial risk should be distributed more evenly between the government and workers but ruled out the introduction of individual-funded defined contribution pensions, which are commonplace in the private sector.

One alternative to be considered in Lord Hutton’s final report, due to be published before the 2011 budget, will be a career average scheme, under which pensions are based on an employee’s average wage during their working life as opposed to how much they’re paid immediately before they retire.

Other options include hybrid schemes, which share the risk, and collective or notional defined contribution pensions.

He suggested raised pension contributions in the short term could help the government make savings but warned against increasing rates for low-paid staff and members of the armed forces.

In his report introduction, Lord Hutton said it was “not tenable” to retain the status quo is not tenable.

He said: “We need to adopt a more prudent approach to meeting the cost of public service pensions in order to strike a fairer balance not just between current taxpayers and public service employees but also between current and future generations.

“In the short term, however, I consider there is also a strong case for looking at some increase in pension contributions for public service employees, to better meet the real costs of providing these pensions, the value of which has risen in recent years with most of these extra costs falling to taxpayers.

“Ministers should, however, proceed carefully and ensure adequate protection and proper safeguards to protect accrued rights, avoid undue hardship and minimise the risk of any rise in the number of employees who opt out of scheme membership.”

Lord Hutton said he rejected the commonly made claim that public sector pensions were “gold plated”, highlighting the average pension in payment was currently £7,800 a year.

Unison general secretary Dave Prentis said: “It is only right that the report recognises that public sector pensions are not gold-plated. We are pleased that Lord Hutton recommends keeping a defined benefit scheme, but we are adamant that the final salary scheme should be retained.

“There is a real danger that taking a career average to calculate pensions will see the low paid getting less in their retirement – especially as the government has switched from using the RPI to using the CPI to calculate pensions.”

Mr Prentis noted that NHS staff paid an average of 6.6 per cent of wages into their pension schemes every year, and said “many would struggle to pay more”.

The Royal College of Nursing also said it was unfair to ask NHS staff to pay more into their pensions, given the current two-year pay freeze, threat of job cuts and restructuring of the NHS.

RCN chief executive and general secretary Peter Carter said: “Today’s interim review asking NHS staff to pay more into their pensions couldn’t come at a worse time.”

He warned that nurses would be angry at the threat posed to their pensions, and the government risked the “steady erosion of goodwill and morale” needed to implement its reform agenda.

“There have already been fundamental changes to the NHS Pension scheme, which the RCN has supported, including an increase in contributions where the highest earners pay most, an increase in the pension age for new entrants, and protection for the tax-payer against any increased liabilities. We believe these changes make the scheme sustainable,” he said.


Readers' comments (40)

  • It is ironic that Hutton wants to end the final salary scheme, when the Tory government likes to celebrate the people who get to the top. In other words "the high achievers". Seems like one rule for public services and another for the private sector. Such hypocracy!

    As for the government losing the goodwill of nurses I don't think they care at all. I feel that this is quite a brutal government albeit presenting itself otherwise.

    Unsuitable or offensive? Report this comment

  • This is very worrying, particularly as a brand new employee of the nhs. I feel i may be one of the hardest hit having to face many challenges throughout my career. however if i work hard and pay my way i should be well rewarded when i reach retirement!

    Unsuitable or offensive? Report this comment

  • A career average would also greatly disadvantage FEMALE workforce who take time out of their careers to have a family and may also work part time until children are older. It is hard to balance career development and a young family and some women choose to hold their career progression and remain in staff nurse posts until the children are more independant.This would be discrimination in its worst form. Only a MAN could come up with this thoughless gem!

    Unsuitable or offensive? Report this comment

  • Oh does he now? Well its okay for LORD Hutton isn't it? He's already got a nice, comfy early retirement all sorted out hasn't he! Cheeky ****!!!!

    Why not go after MP's and the Lords own money troughs FIRST, and then he can come and criticize our pensions!

    Unsuitable or offensive? Report this comment

  • Why exempt the Armed Forces from increased contributions, but not NHS staff? Who is it that mends soldiers' lives when they have been physically or mentally shattered?

    Unsuitable or offensive? Report this comment

  • Well said Mike, couldn`t agree more.

    Maybe they should also try to get some of our money back from those greedy *ankers who started all this in the first place.

    Unsuitable or offensive? Report this comment

  • Mmm lets see now.....just had a pay freeze (effectively a pay cut)....and now we have to increase contributions (effectively a pay cut) well as work for longer.

    Well Mr Cameron you can go and stick your review up your back passage. You can also kiss goodbye any hope you had of being re-elected in 4 years time........cos believe me mate it's just not going to happen.

    Unsuitable or offensive? Report this comment

  • I hope everyone is taking note of our glorious RCN leader, Paul Carter’s comments:

    “There have already been fundamental changes to the NHS Pension scheme, which the RCN has supported, including an increase in contributions where the highest earners pay most, an increase in the pension age for new entrant.”

    We don’t need to worry about the Tories stitching us up as our own staff-side’s are doing it. I don’t remember ever being asked - by the RCN - about my opinion on the NHS pension, although it’s nice to know that our monthly subs are being put to such good use!

    Unsuitable or offensive? Report this comment

  • I dont know about the rest of NHS employee's but personaly I dont think I will be around to collect many years of my pension after I have been worked into the ground in the NHS. That should save the tax payer a few quid

    Unsuitable or offensive? Report this comment

  • Well when I retire at the enforced later age of 67 on my pittance of a pension crippled by the arthritis and back problems exacerbated by the ever increasing work load. I'll have my memories won't I? Well hopefully if the memory loss hasn't set in.

    I have to ask though will the staff get discounts on the zimmer frames and mobility scooters they'll be using during working hours. Lets face it if things carry on the way they we'll be needing them!

    We are frequently being told 'we are an ageing population'. Are we also to be an ageing work force?

    Unsuitable or offensive? Report this comment

Show 102050results per page

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.

Related Jobs