After recent attempts to undermine the public sector, it was refreshing to read John Hutton's words "But it is wrong to say that public service pensions are goldâ€plated. The average pension paid to pensioner members is about Â£7,800 a year. About half of pensioners receive less than Â£5,600 a year. And 90% of pensioners receive less than Â£17,000 a year. Although these figures are partly accounted for by partâ€time or partâ€career working these pensions provide a modest not an excessive â€ level of retirement income.
"I also reject the argument that the downward drift of pensions in the private sector is justification that pensions in the public sector must follow the same course. I have rejected a race for the bottom."
Lord Hutton today "launched his interim report setting out his progress so far in his fundamental structural review of public service pensions. He has set out the case for change in public service pensions: longer lives, the unfairness of a system that rewards high-flyers disproportionately, the imbalance of risk between taxpayers and employees and contribution rates that do not reflect the value of benefits received all demonstrate the need for reform."
The cost of public sector pensions is unarguably a very serious issue. The numbers of post-war 'baby boomers' who are now retired or about to retire, and who can expect to live considerably longer than the generations before them, are going to be an increasing cost in the coming years.
Members of public sector schemes have usually contributed 5-6 % of their income towards their pension. It seems likely that these employee contributions will have to increase significantly in the future.
However, public sector employees, such as those in schools and local government, are naturally very concerned about the possibility of retiring later and contributing more, especially at a time of pay freezes, spending cuts, student debts etc.
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