How much more bewildering can one day be?  Before lunchtime and a Tory has been all over the press saying that paupers need to have fewer children. Expect the legalisation of infanticide before Christmas. Then New Labour ex minister John Hutton tells people that they are going to worker longer and be poorer. Here is his press statement which contains a little bit of Blairite populism as he delivers his Tory message.

Lord Hutton of Furness today set out the case for change in public service pensions: longer lives, the unfairness of a system that rewards high‐flyers disproportionately, the imbalance of risk between taxpayers and employees and contribution rates that do not reflect the value of benefits received all demonstrate the need for reform.
In publishing the Independent Public Service Pensions Commission’s Interim Report, John Hutton said:

“The current public service pension system has been unable to respond flexibly to changes in life expectancy over the past few decades – someone retiring now can expect to spend 40% of their adult life in retirement. This has driven up costs – by a third in the past decade – and these extra costs have fallen almost entirely to taxpayers. The final salary link in public service pensions is inherently unfair and can lead to high flyers getting almost twice as much back in pensions than those on more modest earnings for the same amount of pension contributions. It is also acts as a
barrier to free movement of employees from the public to private sector. The case for reform is clear.

“But it is wrong to say that public service pensions are gold‐plated. The average pension paid to pensioner members is about £7,800 a year. About half of pensioners receive less than £5,600 a year.

And 90% of pensioners receive less than £17,000 a year. Although these figures are partly accounted for by part‐time or part‐career working these pensions provide a modest – not an excessive ‐ level of retirement income.

“I also reject the argument that the downward drift of pensions in the private sector is justification that pensions in the public sector must follow the same course. I have rejected a race for the bottom.”

Speaking in Liverpool at the National Association of Pension Funds (NAPF) annual conference on the day of publication, John Hutton said:

“Long‐term structural reform is needed, as the issues with the current system cannot be dealt with through traditional final salary defined benefit schemes. But neither can they be dealt with appropriately through a funded individual account defined contribution model given that this would place a major financing burden on taxpayers, ignore the ability of Government as a large employer to manage risk, and increase uncertainty of post‐retirement income for scheme members, which is difficult in particular for the low paid to manage. We need an alternative scheme model that provides a fair sharing of risk between the employer and employee and adequate pensions to members.”

The Commission’s final report, looking at long term structural reform options, will be delivered in time for the 2011 Budget. John Hutton continued:

“In my final report I will consider a range of alternative structures. This will include a career average alternative to the current final salary defined benefit schemes. Drawing upon international experience, alternatives such as Sweden’s use of notional defined contribution schemes and the Netherlands’ collective defined contribution schemes will be examined, as will risk sharing models, such as hybrid schemes that combine elements of defined benefit and defined contribution models.”

In line with the Commission’s Terms of Reference, the interim report also considers the case for delivering savings on public service pensions within the spending review period. It concludes that given the implementation time for any longer term reforms 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.

The Commission feels that, if the Government wishes to make short‐term savings, then raising contribution rates would be the most effective way. But in doing so they should have regard to protecting the low paid and should not introduce contribution rates for the armed forces at this time.