What Does Lord Hutton Have in Store For Our Pensions On Thursday 10^th March?

What does the future hold for our pensions?

Today Protect Our Pensions campaign tries to anticipate what might be in the Independent Public Service Pensions Commission’s (IPSPC’s) Report which is expected to be published on Thursday March 10th. The IPSCPC was chaired by former the Labour Government Cabinet member Lord Hutton.

What are the big changes Lord Hutton will recommend?

Encouragingly Lord Hutton has already said that the average pension public sector workers receive per year of £7,800 is hardly gold-plated and has stated that he does not wish to see a “race to the bottom” and wants members to stay in public service schemes and not drop out.

We think his most significant recommendations will cover the type of pension scheme offered to public service workers, retirement ages and scheme governance.

Pension Scheme Type: In other words what we are paid and how they are worked out.

We think Lord Hutton will be recommending that the Final Salary benefits public service workers currently have access to and accrue should come to an end from a future date – probably 2015. He believes that the top earners in public services get too big a slice of the cake and disproportionately benefit from Final Salary schemes.

We very much suspect a move to a different type of defined benefit pension scheme to be recommended, which is very likely to be a Career Average Revalued Earnings (CARE) scheme.   A CARE scheme is one that calculates your pension payments on average earnings over the time you work for your employer. We explain a little bit more what CARE in this news.

One significant piece of relatively good news is that we are hopeful that apart from recommending CARE for future service he will also recommend that the pension benefits you have accrued continue to be linked to your salary increases. This point should not be understated.

Retirement Age: We think he will recommend that scheme Normal Pension Ages (NPA’s) increase in line with the changes to the State Pension Age. If the case and implemented by the Government this would mean all schemes would have to increase their NPA’s to 66 by April 2020. and would in effect mean that public service workers would probably have to work longer to be able to afford their retirement.

This could have serious repercussions for members with a current NPA of 60 or below and members of the NHS Pension Scheme involved in the CHOICE exercise in particular.

How will our pension increases be worked out in the future?

We think that he will recommend that the Consumer Prices Index (CPI) for measuring cost of living increases (i.e. inflation)is particularly inappropriate for active members of CARE schemes in terms of enhancing each year’s benefit accrual and is more likely to look to the Retail Prices Index or National Average Earnings as a more appropriate Index for such members. UNISON would certainly not disagree with this and feel the CPI to be inappropriate for increasing pensions full stop!

What else may he recommend?

Pension Scheme Governance (who looks after our money): .We think he will say that the law has to be changed to make sure that our money is managed in our interests; this may mean members having more say over how our money is looked after. This is something that UNISON has been campaigning for sometime.

In his first report Lord Hutton said it is important that public service pension schemes, like schemes in the private sector, have a clear legal framework and governance rules that everyone can understand and who has a say on how the system works.

Local Government Pension Fund (LGPS) mergers. The LGPS has 101 investment funds in the UK and Lord Hutton may say these have to be reduced to make sure they make as much money for us as possible. Don’t forget in the LGPS any spare cash that is left over after paying out pensions gets invested in things like company shares or property.

Sometimes charges for managing this money can be much higher than we should be paying. We support the reduction in costs for managing this money, which is mainly managed by banks and insurance companies, that fund mergers would bring.

Support for the ending of Fair Deal: Fair Deal looks to ensure that public service workers whom are TUPE transferred to a private contractor are provided with pension benefits by their new employer that are no worse than the pension benefits they were accruing prior to transfer. This is clearly a very significant issue in the midst of a cuts and privatisation agenda.

HM Treasury have just released a consultation document seeking views on whether Fair Deal should be abolished and we think Lord Hutton is likely to add support to this on the basis that he feels it is an unnecessary and unfair barrier to outsourcing.  We would very much disagree!

Increases to our pension contributions – Stop the Bankers £4billion Bail Out Tax

Lord Hutton initially recommend to the government that public sector pension contributions could rise if they were looking to make short term gains.

The government announced in its spending plans in October 2010 that all of ‘pay as-you’ go public sector pension schemes, such as the NHS, should make savings of £2.8 billion by 2014/15 which will come from increased employee contributions to be phased in from 2012.

The ‘savings’ for the LGPS England and Wales are around £900 million a year and around £140 million a year for LGPS Scotland meaning that in effect members of public service pension schemes are to be hit with a collective unjustified £4 billion tax!

It is UNISON’s view that this tax will make the schemes unaffordable for a high proportion of members and if there is a large number of people dropping out it will mean the remaining members have to shoulder the burden of the benefits to be paid.

Our U-Gov poll revealed that around 35% of the general public would leave a scheme that had the same increases in contributions.

This is a tax on over five million active public sector workers, which will also impact their dependents and families, to pay for the crisis the banks and bankers caused!

We have to fight this proposal with everything we’ve got so that we all have an income when we retire! Every single member of a public sector pension scheme, except the armed forces (whom are not going to be asked to contribute any extra), can join us to stop the bankers’ bail out tax on our wages!

The Governor Tells the Truth - Banks Are To Blame - But We Take the Pain

Finally the truth is out and straight out of the horse’s mouth, the Bank of England Governor Mervyn King.

This is what he said to a committee in Parliament last week “the price of this financial crisis is being borne by people who absolutely did not cause it, now is the period when the cost is being paid, I'm surprised that the degree of public anger has not been greater than it has."

So while the bankers continue to gorge themselves on £billions in bonuses millions of pensioners face a cut in their pension payments.

UNISON scheme members face paying a £4 billion tax to pay off debts raised to save the banks.

All public sector workers are to face major changes to their pensions.