Lord Hutton has provided the Government with a fair and sustainable set of proposals for public sector pension reform.
In last week’s final report, the former Labour cabinet minister grasped the nettle that the previous Government was too fearful of handling.
His proposals for a move to career average schemes, linking most public sector pension ages to the state pension and a clear cost ceiling, offer a fair settlement for the taxpayer and public sector workforces.
Hutton was right to avoid the so-called “race for the bottom”. It is in no one’s interests to see large-scale scheme opt-outs. These reforms represent a chance to set an example to private sector employers and it is pleasing they have not been taken as an excuse to slash public sector pensions to the lowest common denominator.
It was predictable to see unions on the attack as a reflex reaction to measures that will see members work longer and many end up with lower benefits. But by looking to ensure the majority of lower-paid public sector workers benefit from the reforms, Hutton has presented certain unions with a tactical headache and blunted a powerful lobbying device.
The report gives George Osborne considerable flexibility in terms of important decisions that still need to be made, such as contribution levels, accrual rates and the discount rate used to calculate contributions. These numbers will have a huge impact on the costs and fairness of the reforms.
But Hutton’s report provides the coalition with the right framework to make these vital decisions to ensure public sector workers get the pensions they deserve while ensuring the system is fair and sustainable for all taxpayers.
Cause for concern
It was pretty shocking to witness FSA duo Hector Sants and Sheila Nicoll unable to provide the Treasury select committee with figures for the number of IFAs who are over-60.
Such figures are central to any debate about the impact of the RDR and should be etched into the minds of policymakers. The pair once again showed a worrying lack of concern about the number of advisers who may leave the industry. The regulator should be doing all it can to ensure as many clients as possible continue to get decent advice post-2012.