John Hutton Appointed to Review Public Sector Pensions

John Hutton, former Secretary of State for Defence under Labour, is to head a commission to examine and make recommendations on public sector pensions. The commission will produce an interim report in the autumn, and a final report before the 2011 budget.

In 2008 the council workers' scheme, the Local Government Pension Scheme, underwent an overhaul. It changed the scheme from being a 1/80th contribution to a 1/60th. Those earning more than £18,000 also had to increase their level of contribution. The LGPS is also distinguished by being one of the few schemes that maintains its own funds and pays its retired workers from that fund - most other public sector schemes do not maintain their own fund, and instead retired workers are paid from government funds. Of course, regardless of who holds the funds, all workers with a pension make a contribution, though the percentage contributed by both the employer and employee varies across schemes.

In the last budget, George Osborne announced that all public sector pension payout were to be indexed to the Consumer Price Index measure of inflation. The CPI is based on a 'basket of goods' measure, and does not include house prices.

Reports in the media suggest that workers may face a choice between increased contributions (effectively a pay cut), or reduced payouts.

The list of pensions schemes to be examined by the commission is as follows:

  • Principal Civil Service Pension Scheme
  • Principal Civil Service Pension Scheme (Northern Ireland)
  • Armed Forces Pension Scheme
  • NHS Pension Scheme
  • NHS Superannuation Scheme (Scotland)
  • Health and Personal Social Services Northern Ireland Superannuation Scheme
  • Teachers' Pension Scheme (England and Wales)
  • Scottish Teachers' Superannuation Scheme
  • Northern Ireland Teachers Superannuation Scheme
  • Local Government Pension Scheme (England and Wales)
  • Local Government Pension Scheme (Scotland)
  • Northern Ireland Local Government Pension Scheme
  • Police Pension Scheme
  • Firefighters' Pension Scheme
  • United Kingdom Atomic Energy Authority Pension Schemes
  • Judicial Pensions Scheme
  • Department for International Development - Overseas Superannuation Schemes
  • Research Councils' Pension Schemes

The press release also mentions that "there are a number of smaller schemes and many established to cover only one senior appointment which do not specifically need to form part of the review but which will be required to act on the recommendations."