Main points of the public sector pensions review
Former Labour minister Lord Hutton has set out proposals for wide-ranging reforms to public sector pension schemes. These are his main recommendations:
* Public sector workers should be moved from final salary pensions to career average ones for future accruals, although he stopped short of making recommendations for the schemes' design;
* The new schemes should be in place by the end of this Parliament in 2015;
* The Government must honour in full the pensions that workers have already built up in final salary schemes, maintaining the final salary link for past service;
* Pension schemes should be the same for workers of all incomes, but tiered contribution rates should apply to higher and lower earners;
* The normal retirement age for public sector workers should be the same as the state pension age, meaning it would increase to 66 for both men and women by 2020, apart from members of the armed forces, police and firefighters, who should have their retirement age raised from 55 to 60;
* Members should have a greater choice over when they can start drawing their pension, enabling them to opt for earlier or later retirement, as well as taking a flexible approach to giving up work;
* The different public sector pensions, which have different contribution and accrual rates, should move towards a common framework, although Lord Hutton is not proposing that a single public sector scheme should be set up;
* A clear cost ceiling should be introduced for the proportion of pay that taxpayers will contribute to public sector workers' pensions;
* The Local Government Pension Scheme should continue to be funded, but all other schemes will continue on an unfunded basis;
* Workers and their representatives should be involved in a consultation process on the design of the new schemes;
* Public sector schemes should have a Pension Board to ensure good standards of governance and effective administration, while they should also have independent oversight;
* The schemes should provide regular benefit statements to members;
* The Office for Budget Responsibility should provide a regular published analysis of the long-term fiscal impact of the schemes.
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