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Hutton appointed chairman of UK pensions commission

UK - John Hutton, a secretary of state for work and pensions in the previous Labour government, has been appointed chairman of the UK's Independent Public Service Pensions Commission.

The commission has been set up following longstanding criticism of the disparity between what is perceived as the relatively generous public-sector pensions system and the less favourable pension provision in the private sector.

It is to undertake a fundamental structural review of public-service pension provision by the time the 2011 Budget is delivered.

It will also produce an interim report in September this year, considering the case for short-term savings within the Spending Review 2010 period.

The commission will make recommendations on how public-service pensions can be made sustainable and affordable in the long term, fair to both the public service workforce and the taxpayer and ensure they are consistent with the fiscal challenges ahead.

Other issues to be considered will include the growing disparity between public and private-sector pension provision; fairness in future pension provision across the workforce; how risk should be shared between the taxpayer and employee; and wider government policy intended to encourage adequate saving for retirement and longer working lives.

However, existing accrued pension rights will be protected.

The scope of the commission's review will include pension schemes for civil servants, NHS employees, teachers, local government employees, police and the armed forces.

The total cost of unfunded public service pensions in 2010-11 is estimated at £25.4bn, excluding funded schemes such as the Local Government Pension Scheme.

The Government Actuary's Department has estimated the long-term liability of unfunded public-sector pensions at £770bn (€922bn), as at 31 March 2008.

Joanne Segars, chief executive of the NAPF, said: "John has a wealth of experience in dealing with contentious issues and a good understanding of the challenges facing pensions.

"We look forward to working with him. Some reform of public-sector schemes is inevitable, but the process must be reasonable, transparent and fair."

Bob Summers, chair of CIPFA's pensions panel, said: "CIPFA very much supports the idea of the commission. It provides an opportunity for us to look across the whole of public-sector pensions."

But he added: "It will be important to define what we mean by the public sector because it could include not just schemes for civil servants and fire-fighters, say, but also quasi-public sector organisations like the BBC.

"Furthermore, a number of schemes provide pensions for relatively low-paid employees - for local government workers, the average pension is £4,000 a year.

"It is important we look at this over the longer term because, if we don't all save adequately in the future, there could be an impact on taxation for expenses such as the costs of long-term care."

Meanwhile, actuaries Barnett Waddingham will present Steve Webb, the pensions minister, with a 10-point pensions charter intended to repair the reputation and structure of the UK pensions system.

The charter includes recommendations to increase the basic state pension over the shortest possible timescale to bring it into line with the pensions credit threshold; increase the state pension age for men and women incrementally to age 70 by 2030; and allow private pension plans to raise pension ages in the same way as the state.
 

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