MSE News: Public sector pension benefits should be cut – report 10 March 2011 at 11:30AM in Pensions, annuities & retirement planning 157 replies 18.1K views

Former_MSE_Helen

This is the discussion thread for the following MSE News Story:

"Public sector workers should be stripped of final salary pensions, says former Labour Cabinet Minister Lord Hutton ..."

Read the full story:
Public sector pension benefits should be cut – report

Andy_L

Seeing as how Hutton doesn't say "Public sector workers should be stripped of final salary pensions" (but that future accrual should be career average) who are you quoting?

Actual report here:
http://www.hm-treasury.gov.uk/indreview_johnhutton_pensions.htm

Oblivion

I've had a quick skim read of the report. I'm already retired so it doesn't affect me directly, but I fear for my wife who is a teacher with only 2 years to go to her planned retirement at 60.

I suppose we will have to wait until we know just how the government will implement Hutton's recommendations and in what timescale. I only hope that there are some sensible transition arrangements and that they don't flick a switch and say to my wife, right you can't now draw your pension until you are 63 or whatever!

I imagine a lot of public sector workers nearing retirement will be biting their finger nails right now and waiting to see how the machinations unfold. Worrying times.

Stargazer57

I only hope that there are some sensible transition arrangements and that they don't flick a switch and say to my wife, right you can't now draw your pension until you are 63 or whatever!

If she is 58, I think you are worrying about nothing:

Ex.50 The Commission’s expectation is that existing members who are currently in their 50s should, by and large, experience fairly limited change to the benefit which they would otherwise have expected to accrue by the time they reach their current scheme normal pension age. This would particularly be the case if the final salary link is protected for past service, as the Commission recommends.

taking_stock

Oblivion wrote: »

I've had a quick skim read of the report. I'm already retired so it doesn't affect me directly, but I fear for my wife who is a teacher with only 2 years to go to her planned retirement at 60.

I suppose we will have to wait until we know just how the government will implement Hutton's recommendations and in what timescale. I only hope that there are some sensible transition arrangements and that they don't flick a switch and say to my wife, right you can't now draw your pension until you are 63 or whatever!

I imagine a lot of public sector workers nearing retirement will be biting their finger nails right now and waiting to see how the machinations unfold. Worrying times.

so it wont affect her at all - it's due to come in by 2015, with any past service accrual protected at the original retirement age. so she has nothing to worry about.

Dr_Wu

Oblivion wrote: »

I've had a quick skim read of the report. I'm already retired so it doesn't affect me directly, but I fear for my wife who is a teacher with only 2 years to go to her planned retirement at 60.

I suppose we will have to wait until we know just how the government will implement Hutton's recommendations and in what timescale. I only hope that there are some sensible transition arrangements and that they don't flick a switch and say to my wife, right you can't now draw your pension until you are 63 or whatever!

I imagine a lot of public sector workers nearing retirement will be biting their finger nails right now and waiting to see how the machinations unfold. Worrying times.

Obviously, this is just a report, recommendations if you like, but if the Govt do follow what Hutton recommends then your wife (and myself for that matter!) should be okay.

Throughout the report he stresses that existing accrued rights should be preserved including the age at which existing benefits can be claimed. If I'm reading things correctly then what will happen will be this:

New scheme comes in 2014 or 2015 (unlikely to be sooner). At that point we all switch to a new less attractive but more sustainable scheme. However we keep the accued benefits up 'till that point and still get to take them at the existing retirement age. Any build up of pension on the new scheme will not be accessible until 65 (possibly later if they link it with the rise in state pension age)

So people close to retirement age who will have built up close to the max pension (in my case 40/80ths) by 2014/2015 won't notice much, if any difference. The younger you are and further away from retirement the more impact it will have.

What will happen is an increase in our pension contributions fairly quickly and also the impact of the proposed RPI to CPI move on index linking (although, did I read correctly that Hutton recommends RPI??)

Happy to be corrected if anyone reads this differently!

hugheskevi

However we keep the accued benefits up 'till that point and still get to take them at the existing retirement age. Any build up of pension on the new scheme will not be accessible until 65 (possibly later if they link it with the rise in state pension age)

The pension is accessible after 50/55 at a reduced rate - it is just the age at which an unreduced pension is payable from which changes.

The report seems quite clear about a link to State Pension age, so many will have a new NPA of 66, 67 or 68. Any future increases in SPA would automatically change the NPA both of historic and future accruals.

But NPA in isolation isn't interesting - you could have a high accrual rate and a high NPA and have a generous pension even after actuarial reduction, or a low accrual rate and a low NPA and have a very low pension. Hutton does not opine on an appropriate accrual rate, and without that you cannot say very much about the scheme really.

(although, did I read correctly that Hutton recommends RPI??)

That is not my understanding. There are references to earnings growth being assumed to be RPI+1.5%, and a few other references, but none express a position.

Andy_L

Dr_Wu wrote: »

What will happen is an increase in our pension contributions fairly quickly and also the impact of the proposed RPI to CPI move on index linking (although, did I read correctly that Hutton recommends RPI??)

Happy to be corrected if anyone reads this differently!

Nope, he's accepted RPI/CPI & the 3% increase as a "done deal". He does suggest that revaluation for the career average scheme (ie before retirement) should be by average wages rather than an inflation measure but then post retirement should be inflation linked

badgerhead

the armed forces should not retire before 60? after 22 years in the infantry, the average blokes body is in !!!! state, bits missing slipped disks etc, but he wants them to crack on for another 20 years.

hayleythedaisy

With public sector jobs paying less money, offering less security, and less pension benefits, how do they expect to get anything other than monkeys being attracted to doing them??
Services that have not already been scrapped will start to fail and communities will get even less out of their Councils, Schools, Hospitals etc etc.
Futher to Badgerhead's comments... I am not so sure I fancy the average 59 year old rescuing me from a burning building, chasing a criminal down the street or fighting for this country.
How unrealistic.

Rummer

Just to check does this apply across the UK as a whole?