From the TUC

A detailed critique of the Hutton Report

10 Jun 2011, by in Pensions & Investment

Here is an important new paper that provides a detailed critique of the Hutton Report into public service pensions published by CRESC, the Centre for Research on Socio-Cultural Change.

It is thorough – and well-worth some serious study.

Although it came out a little time ago when I was away, it is also still worth linking to the Public Accounts Committee report on public service pensions. This is further rebuttal of the “unreformed,unaffordable, costs out of control” attacks from government supporters.

Committee Chair, Margaret Hodge MP said :

Government projections of the future cost of public service pensions suggest that the changes made in 2007-2008 will stabilise costs at around 1% of GDP, thereby bringing substantial savings to the taxpayer. This would be a significant achievement.”

Negotiations are currently taking place about the future of public service pensions, but it is worth setting out just how many different changes are working their way through the system and why so many public servants are extremely worried:

  • The changes negotiated under the last government and examined by the PAC will start to make a difference as soon as scheme revaluations take place (which even if nothing had changed would still probably result in bigger contributions.) This is because the “cap and share” provisions, for first sharing and then capping the employer cost of unexpected longevity increases wil start to bite. This will probably require around an extra £1 billion from members. Hutton estimates these changes reduce 10 per cent from the value of public service pensions.
  • The switch to CPI indexation reduces the value of pensions by a further 15 per cent according to Hutton.
  • The government announced in the spending review that they want to increase employee contributions by three per cent.
  • The Treasury has changed the discount rate used in pension scheme revaluations. Although they say that this will be absorbed by the contribution increases they have already announced this time, it will mean higher contributions in the next round of revaluations.
  • A consequence of a faster move towards a flat-rate pension is a faster reduction in – or even the end of – the National Insurance rebates in contracted out pensions. All public service pensions are contracted out (as are a majority of private sector DB schemes).

One Response to A detailed critique of the Hutton Report

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