Hutton: Pensions Reforms May Not Be Enough

The Government's planned overhaul of public sector pensions may not be enough to bring soaring costs under control, according to the Labour peer who carried out a review of the system.

Former Work and Pensions Secretary Lord Hutton said his findings now looked "too optimistic" after UK growth forecasts were significantly downgraded by the Office
for Budget Responsibility (OBR).

Hundreds of thousands of public sector workers, including teachers, nurses and civil servants walked out last Wednesday in protest over the plans, which would lead to increased contributions and raise the reitrement age.

In an interview with BBC Radio 4's World This Weekend, Lord Hutton urged unions to accept the deal while it was still on the table.

"What the Government have tabled is a perfectly credible offer," he said. "I think it gives significant protection to those close to retirement and very generous accrual rates.

"What has happened in the last few months confirms the very important point that we can't be sure that over 50 years we will get to a better balance. So let's bring those savings forward as quickly as we can."

Work and Pensions Secretary Iain Duncan Smith backed Lord Hutton's comments, telling Sky News' Murnaghan: "The unions who went on strike are living in a slightly unreal area.

"There simply isn't the money they think there is to pay the pensions.

"His warning that given the nature of the economy - not just us in isolation but in the European economies and indeed the Western world - may in the future mean that this isn't enough. So in truth this is a pretty generous package for workers."

However, Lord Hutton acknowledged further discussion was needed on some issues raised by the unions.

"I think the danger with the proposals is that a lot of people on low to moderate incomes.

"Ministers will say those on under £15,000 don't pay anything and there are graduated increases between £15,000 and £21,000 - but in the current climate that might be enough to persuade large numbers to opt out.

"The unions have raised some genuine concerns and I hope ministers can look again at some aspects of the way they are planning to increase pensions contributions."

Meanwhile, Prime Minister David Cameron has written to ministerial colleagues to tell them they will share the pensions pain.

The memo, seen by the Mail on Sunday, said: "Our pensions are among the most generous in the public services.

"We cannot expect public service workers, some of whom are very modestly paid, to take on a burden we are not prepared to assume for ourselves."

Staged rises in contributions over the next three years will see Cabinet ministers paying in 17.9% of their pay to get the same benefits - some £4,000 more.

Ministers of state will pay an extra 4%, equivalent to £1,320, while junior ministers face 2.5% hikes costing £592.

The Prime Minister himself will be hardest hit with an additional bill of £4,600 per year.