The final report of Lord Hutton’s commission represents the first steps in the reform of public sector pensions but there remains a lot of work still to do according to the Chartered Institute of Public Finance and Accountancy’s Pensions Panel chair, Bob Summers.
Commenting on the report released today, Mr Summers said:
‘The report sets out the framework which will determine the future of pensions for public sector workers. The challenge now is how we bring public sector pension schemes into line with these recommendations in the context of the wider reshaping of public services, the changing pensions landscape and the previously announced increases in employee pension scheme contribution rates. Given the number of schemes involved and the nature of the changes, this will be no easy task.’
The report follows the Chancellor’s announcement in the 2010 spending review that public sector pension schemes should seek to raise an additional £3.7 billion from increased employee contributions by 2014-15, a move which some believe could lead to large-scale opt-outs from public sector schemes.
‘Public sector schemes are already having to factor in reduced contributions from employees as a result of a loss of members through workforce reductions. Further reductions in income as a consequence of opt-outs prompted by unaffordable employee contribution rates will result in a pensions “double whammy” for the taxpayer: increased state funding now to make up for the lost employee contributions and increased state funding in the future to pay for state benefits to replace the lost pensions,’ Mr Summers added.
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1. CIPFA made two submissions to the Independent Public Service Pensions Commission call for evidence on 15 December 2010 and the 30 July 2010.
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