Flexible contributions urged for low-earners
Pension consultancy Hymans Robertson has urged Lord John Hutton to consider allowing low-earners flexible contributions and limited early access to their savings in his public sector pension reform proposals.
Last June, the Government commissioned Hutton to chair an independent public service pension commission.
He is exploring various reform options based on career average earnings after the former Labour minister signalled the end of “unsustainable” final- salary provision in his interim report last October.
Hymans Robertson head of public sector consulting John Wright says a “savings account” structure could boost participation rates among young workers and the low-paid and imp-rove members’ appreciation of their pension benefits.
Wright says: “In hard times like now, when there have been pay freezes and inflation is still on the rise and standards of living are falling, one of the first things people cut will be their pension contributions. You could have a system which allows low-paid employees to pay lower contributions and still get employer contributions. At the moment, the only option for the low-paid is to be in and pay, for example, 6 per cent or pay nothing and be out of the scheme.”
Wright says allowing public sector workers limited early access to their savings could also be included in the reforms. The Treasury is consulting on options for early access to pensions in private sector schemes.
Hutton is due to deliver his report to Chancellor George Osborne before the March 23 Budget.