Pensions Commission Report published

The report of the Independent Public Service Pensions Commission (the Hutton Commission) is published today. It contains wide ranging proposals (which constitute recommendations and need not be implemented) relating to the design of public sector pension schemes. The Report contains nothing particularly unexpected (there was an interim report published in 2010) but at least one of the proposals will have a significant bearing on many members' pensions. The major proposals include:

  1. The total protection of benefits currently accrued (that is, paid for to date). Benefits paid to date would be continue to be based on the final salary mechanism
  2. A career averaged salary rather than a final salary mechanism (the important change) but with the protection referred to above
  3. The career averaged mechanism would uprate the annual contribution from teachers (and the employers) in line with an average earnings index during the accrual period (up to retiral date)
  4. When put into payment, pensions will continue to be upgraded annually in line with a Government imposed index
  5. There would be a ceiling to employer contributions with an agreed mechanism to determine funding arrangements if the ceiling would require to be breached
  6. There would be no single public sector pension scheme
  7. There should be a review of scheme management arrangements
  8. New proposals should be capable of being put into practice during the lifetime of this Parliament

Members will also be aware of the Government's clear intent to increases teacher contribution rates in three stages until contribution rates (currently 6.4% of salary) reach a figure above 9%.

Essentially the proposals will

  • Have no effect on those already retired or about to retire
  • Have minimal effect on those aged 50 or so (and who intend to retire at or before 60)
  • Have greater effect on those younger than 50 with increasing effect as age decreases
  • Have significant effect on those earning (or will earn) the largest salaries

Further information will follow as matters develop.

Jim Docherty

Depute General Secretary