Update on pension information

16 March 2011

The Independent Public Service Pensions Commission, chaired by Lord Hutton, has published its final report.

The Commission’s remit was to undertake a fundamental structural review of public service pension provision and make recommendations on provision which the Government termed as ‘sustainable, affordable and fair in the long term.’ If accepted, the Commission’s recommendations will directly affect staff in the Teachers’ Pension Scheme (TPS) and the Local Government Pension Scheme (LGPS)

The key recommendations are:-

  • An end to final salary accrual for the future, with current members to be moved into a career average scheme by 2015.
  • Honouring, in full, the pension promises that have been earned by scheme members (their accrued rights) and maintaining the final salary link for past service for current members.
  • An increase in the schemes’ Normal Pension Age (NPA) to 65 (for future service) and thereafter to increase in line with the State Pension Age (expected to rise to 68 by 2046). Note that the NPA is already 65 for members of the LGPS and new entrants to the TPS from 01 January 2007.
  • A cost ceiling for employer contribution rates with a mechanism to either increase the employee contribution rate or reduce benefit accrual should the cost of running the scheme reach the cost ceiling.
  • In his interim report, Lord Hutton has already recommended an increase in employee contributions to ensure that they adequately reflect the value of the benefit and limit the burden on the taxpayer. The Government has already accepted this particular recommendation.

The Government may choose to implement some, all or none of the Commission’s recommendations in
redesigning public sector pension schemes. Any redesign will only come after a comprehensive consultation process involving employees and their representatives, but Lord Hutton considers implementation of the new schemes possible before the end of this Parliament in 2015. The Chancellor is expected to make some comment in his Budget on 23 March but it is being reported that the full Government response may be deferred until June.

If you have any enquiries please contact Jayne Brown (Pensions Manager) on ext: 8756.

Page last modified by Corporate Communications on 16 March 2011.
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