Tomorrow at 8am former Labour Secretary of State for Work and Pensions will fire the gun in the opening battle to defend our pension provision. You will be able to read it here..….
http://www.hm-treasury.gov.uk/indreview_johnhutton_pensions.htm
Lets all be clear and resolute we must beware the wolf in sheep’s clothing! For whatever Hutton recommends can be thrown away for something more draconian to be imposed on us by Osborne.
Before we look at what Hutton may propose we must remember what has been done so far. Billions of pounds have already been wiped from the public sector pension bill this year, when calculations for inflation on payments shifted from the retail prices index (RPI) to the consumer price index (CPI). The RPI rate, which includes housing costs, in August, was 4.7%, compared with a CPI rate of 3.1%. By one calculation this will cost the average public sector worker £20,000 in pension payments over their lifetime.
The only immediate option open to Hutton that would increase income to pension schemes was to raise contributions, effectively taking money out of our pay packets at a time that we already face a pay freezes.
Raising the retirement age will be another easy hit for Hutton, possibly to 66 or 67.
So while Hutton will recommend the end of final salary to be replaced by career average the government may say that’s not far enough. When the Tories were last in government they commissioned a paper in 1993 on ‘efficiencies in the LGPS’ which recommended the ‘deregulation’ of the scheme which would allow councils to choose their own pension scheme and move away from final salary provision.
He is also been asked to rule definitively on the so called pensions gap between the public and private sector. Most final salary schemes in the private sector have been closed and replaced with money purchase schemes that pay out very little and make sure that all the liability falls on the worker and not on the company’s share price. Ministers believe that they will gain support for measures to cut public employees' pensions by exploiting that gap, arguing that it is unfair for private sector workers to pay taxes to fund generous public sector schemes, but receive only a state pension themselves because the money purchase does not deliver enough.
So lurking in Hutton’s report will be the propaganda to place us at the full mercy of the bankers and fund managers, the Money Purchase pension scheme. Where 40% of your contributions get eaten up in fund management charges and little is left at the end to live on.
