The Hutton report

Lord Hutton has now submitted his final report into public service pension schemes to the Government. The report builds upon the interim recommendations made in October 2010 and in addition identifies a timescale of 2015 (the end of the current parliament) for these changes to be achieved.

The main suggested changes are:

• Pension ages should rise to (and with) the state pension age. This is currently 65 years. Those working in uniformed services will move to a normal pension age of 60 years.
• Final salary schemes will be closed to new accruals and that defined benefit career average (CARE) schemes are put in place for future pension service.
• CARE schemes are revalued at the rate of earnings growth and pensions in payment should be uplifted by the rises in consumer prices.
• Accrued rights (which you will have built up at the point of any change) in the final salary schemes will be protected. This includes the age at which that pension becomes payable.
• Public service schemes deliver ‘adequate’ pension provision in retirement when combined with the state pension.
  Employee contributions to the schemes move to a ‘tiered’ basis where the higher earners pay more in contributions. This applies in the NHS at present.
• The Government should consider what proportion of pensionable pay employers should pay in the future.
  Non-public sector workers should not have access to the NHS pension scheme.
• Access to public sector pensions should be seen as part of the remuneration package for employees and the value of pension should be considered by the independent pay review bodies.

These are complex issues but there are also other critical pension issues that have to be determined:

• It is expected that pensions in retirement will in future rise only by the consumer price index (CPI) rather than the retail price index (RPI) which is generally higher.
• Consultation has just closed on the discount rate. This affects what pension contributions will be needed over time.
  Consultation has just started on whether the current Fair Deal arrangements should continue. Fair Deal says that where NHS staff are moved out of the service under Transfer of Undertakings Protection or Employment (TUPE)  but continue to deliver NHS funded services, their new employer should provide a ‘broadly comparable pension scheme’ to the NHS scheme.
• Following Lord Hutton’s interim report where he recommended that staff should pay more pension contributions, the Government, in the Comprehensive Spending Review, have asked all schemes to achieve three per cent savings through increases in employee contributions of an average of three per cent over the three years 2012 to 2015. The RCN has not accepted the need for this increase and discussions are taking place on this point between the trade unions and Government.

Although there is a lot of detail that we do not know, it is clear that public service staff will have to work longer, pay more into their pension scheme and probably receive less pension than they expected.

The RCN is under no illusion about how members feel about their pensions. Congress has debated these issues quite recently and the view from the floor was very clear. RCN Chief Executive & General Secretary Dr Carter was clear in his press release – the RCN will continue to fight for fair pensions for our members.

Keep a look out in RCN Bulletin and Activate for more information and read the full report on the HM Treasury website.