Budget 2011: Government accepts Hutton’s review of public sector pensions

Chancellor George Osborne has announced the government accepts the recommendations made in Lord Hutton’s Independent Public Service Pensions Commission report.

In his Budget report, Osborne stated that the government recognises “the position of the uniformed services will require particularly careful consideration”, and that it will set out proposals in the autumn that are “affordable, sustainable and fair to both the public sector workforce and the taxpayer”.

Published on 10 March 2011, one of Hutton’s recommendations was that existing final salary public sector pensions schemes should be replaced by new career average schemes.

Joanne Segars, chief executive at the National Association of Pension Funds (NAPF), said: “It is encouraging that the government has formally accepted Hutton’s report and has pledged not to cherry-pick from it. But it should think carefully about how and when it increases employee contributions into pensions.

“Public sector workers are facing uncertainty about jobs and pay, and a significant hike in contributions could spur many to quit their pensions.

“Pushing people out of their pensions will only deepen the UK’s looming retirement crisis. And if opt-outs are high the government might not generate as much money as they expect from pension contributions.

“A decision about contribution levels should only be made alongside the wider-ranging, future reforms which will follow the Hutton report.”

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