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Hutton pensions report ‘another big salami slice’ of the retirement incomes of public sector employees, says Unite

10 March 2011

The Hutton report on public sector pensions -  released today (Thursday 10 March) – is ‘another big slice of the salami attack’ on the retirement incomes of public employees, Unite, the largest union in the country, said.

Unite, which has 250,000 members working in the public sector, said that the continuing onslaught on public sector pensions will mean pension poverty for many in the decades to come, especially for low-paid women.

And the review coming in the week when the 83 per cent state-owned Royal Bank of Scotland (RBS) awarded bonuses to its top executives ‘left a nasty taste in the mouth’ for tax-paying public sector employees who are now propping up the lavish lifestyles of the City elite.

Unite assistant general secretary, Gail Cartmail, said: ”The Hutton Review comes hard on the heels of other government proposals which will seriously erode public sector pensions - for example, the switch to the consumer price index (CPI) slashes about 15 per cent on average from pension values.

”And, coming as it does in the week when two banks – RBS and Barclays - awarded stratospherically high bonuses, it will not reassure low-waged public servants who have given years of dutiful service to this country that the government puts fairness first. It leaves a nasty taste in the mouth.

”The warm words on protecting the low paid are little comfort to the largely female workforce in the schemes - especially the Local Government Pensions Scheme (LGPS). Hutton says there's a limit to the amount people will save via pension contributions - unfortunately, many women will vote with their feet, opting out of pension saving and thereby ensuring they are trapped in pension poverty when they retire.

”We welcome the retention of defined benefits and also the assurance that past service benefits will not be compromised further than they have already been by the arbitrary switch to CPI.
 
”We regret that prescriptive changes are recommended across the board rather than allowing changes to be determined by discussions with the workforce representatives in each of the schemes. There are already agreed arrangements in place to address any increase in the cost of benefits, which are now to be over-ridden.

”The quality of any career average scheme depends crucially on what accrual rate is specified and at what rate benefits once accrued are revalued. It could be better for some, but we fear it could be worse for all.

”In the largest schemes, it is already established that members will bear the additional cost of longer retirements due to lower mortality, so we do not need to impose a rise in normal pension age.

”Setting a cost ceiling for public sector schemes is nothing new, but it is evident that the government intends to distort this recommendation by changing the way in which the cost is calculated.

”Lord Hutton had already recognised in his interim report that public sector pensions are not ‘gold plated’ – the average local government pension is just £4,000-a-year and a part-time female NHS employee can expect an average of £2,500-a-year.    

”However, this report only gives an outline of future pensions and its impact will be shaped by what the coalition is concocting to hit public sector pensions.

”The fear is that Lord Hutton’s report will be cherry-picked  by ministers for those recommendations that dovetail with their menu of radical measures that will hit the living standards of public employees extremely hard in their retirement. Recommendations that could be favourable to employees will be simply discarded.”

ENDS

Notes to news editors:

For further information please contact Gail Cartmail on 07768 931305 and/or Unite communications officer Shaun Noble on 07768 693940

Unite outlined four changes being proposed by the coalition that would have an adverse affect on public sector pensions:

• The change from calculating pensions increases from the retail price index (RPI) to the consumer price index (CPI), which Lord Hutton has estimated would be the equivalent of a 15 per cent reduction. Unite said this would have ‘a devastating effect’ with a reduction in the long-term value of benefits.
• The £2.8 billion annual ‘raid’ on public sector pensions announced in last autumn’s comprehensive spending review due to increased average contributions of three per cent for members. Unite said that ministers were using the public sector pensions funds as ‘a piggy bank’.
• The tearing up of the ‘fair deal’ commitment to public sector employees transferred to private sector companies, which has meant those employees continuing to pay into and receive the benefits of the public sector pension funds. This could mean staff, whose employment is contracted out, but are still providing public services, will see their pensions grossly reduced.
• The Treasury’s current review of the discount rate – a technical measure designed to ensure that the government pays less in contributions by inflating the cost of pensions, so as to justify further cuts.