The Office for Budget Responsibility estimates an annual shortfall of £4 billion between what workers are paying into the schemes and what is being paid out to retired workers, a figure expected to rise to £9 billion by 2015. Some 6.1 million workers will be affected. Most will have to work longer before they can receive lower pensions.
Lord Hutton’s suggestions include public sector workers paying more into existing schemes and retiring older for the same benefits.
The 55-year old former Work and Pensions Secretary said two of his four children work in the public sector and he was aware of the perceived unfairness of telling younger people that they will have to work longer, but he urged the coalition to stand firm and resist threats of a so-called “summer of rage”.
But the RMT’s Bob Crow said it was the final provocation for many: “It is crystal clear from the Hutton review that, from nurses to transport staff, the Government intend to make staff work longer, pay more and get less. There is no question that this is the issue where co-ordinated strike action is on the cards as we fight to stop the Con-Dem pensions robbery.”
Public sector workers are to be asked to pay an extra 3 percentage points of their monthly salary into the pension schemes. A teacher’s pension contributions would increase from 6.4 per cent of their salaries to 9.8 per cent by 2014 – an extra £1,011 a year.
While the Hutton report says some 2,960 people get annual pensions of £67,000 most people get nowhere near that: the median pension for local government workers was just £3,048 a year, for NHS workers £4,087; for teachers £10,275 a year; for police officers £15,583. Private sector pensions have been paying out even less.
Lord Hutton proposes that public sector workers, many of whom may retire at 60, draw their pensions later in life, at the state retirement age – 66 for both men and women, rising to 68 by 2020.
In addition to raising the age qualification, Lord Hutton recommends moving from a final salary scheme – which pays out up to two-thirds of the salary earned in the year before retirement – to a career average.
