Posted on October 10th, 2010 | Categories - Pensions
People who pay in to public sector pensions should contribute more, according to the findings of a commission led by Lord Hutton.
The commission was set up to assess the ways to reduce the cost of public sector pension schemes, which cover those who work in the civil service, local government and the NHS.
Lord Hutton said: “There is a case for short term changes, especially given that the commission found that current government assumptions may well underestimate the cost to the taxpayer and past increases in life expectancy have been paid for in the most part by taxpayers”.
He added that final-salary schemes were “fundamentally unfair” because high flyers get “almost twice as much back in pensions than those on more modest earnings for the same amount of pension contributions”.
He also said that there is no evidence to show that public sector salaries are lower than the private sector to mirror higher pension provisions.
Joanne Segars, of the National Association of Pension Funds (NAPF) said: “The report dispels some of the myths about these pensions but is realistic about the need to reshape them. All workers deserve a good workplace pension, whether private or public sector”.
Some of the changes that the commission is considering are to raise the pension age as life expectancy increases and to change final salary schemes to career-average schemes, which produce a fairer pension pay out to workers who have contributed a similar amount throughout the course of their employment.