Former Labour cabinet minister Lord Hutton has suggested that those who work for the NHS, teachers and police should receive pensions based on their average salary throughout their career, rather than ones based on their pay immediately before they retire.
He also urged the government to raise the age at which most public sector staff can start drawing their pension to the same as the state pension age, while members of the armed forces, police and firefighters should not be able to retire before the age of 60.
Lord Hutton’s proposals are expected to anger unions, which have already warned that public sector staff are prepared to strike to ensure their pensions are protected.
Unison general secretary Dave Prentis urged the government to hold talks to discuss the report, rather than “rushing” to make cuts and face industrial action.
Lord Hutton proposes that the government should be able to introduce new career-average schemes by 2015, although the armed forces and police could have a longer transition period if necessary. He also wants a “clear cost ceiling” to be introduced for the proportion of pay that taxpayers would contribute to public sector workers’ pensions.
However, he revealed pensions that had already been accrued by staff in final salary schemes would be honoured in full.
He said: “The current model of public service pension provision is clearly not tenable in the long-term. There is a clear need for reform.”
Lord Hutton added that in order to get the right structure in place for the new schemes, it was important that there was “effective dialogue” between public sector employers, workers and unions.
There are five main public sector pensions, with schemes for local government workers, the NHS, teachers, the civil Service and the armed forces. There is a wide variation in contribution rates across them.