As expected, John Hutton’s review of public sector pensions has recommended that
final salary schemes end. Hutton was across the broadcasters this morning, explaining that he was reflecting an “inescapable reality”:
“The solution to this problem is not a race to the bottom, it’s not to hack away at the value of public service pensions. It’s to manage the risks and costs sensibly. The responsible thing to do is to accept that because we are living longer we should work for longer.”
Beside realism, Hutton’s guiding principle has been fairness. Final salary schemes encourage a “massive cross-subsidy from low-paid public servants to high-paid public servants” to pay for the “sudden spike” in pay at the end of a career. Hutton is “deeply troubled” by a policy that forces younger generations of public sector workers to “shoulder the cost and burden change”.
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