FINAL salary pensions will be scrapped and public sector workers forced to work for longer, under plans unveiled yesterday by John (now Lord) Hutton.
The Bairite Hutton, the ex-work and pensions minister, was commissioned by the Tory Lib-Dem coalition to review public sector pensions.
Delivering his preliminary, 174-page report yesterday, Hutton said there was a ‘strong case’ for axing the final salary pension scheme and making public sector workers work longer.
Bob Crow, general secretary of rail union RMT, said: ‘This attack on the people who make this country tick will spark a furious backlash and will drive millions on to the streets in French-style protests to stop the great pensions robbery.’
New Labour Party leader Ed Miliband intervened to give support to the government, to say he would not support a wave of public sector strikes over pensions.
Hutton said: ‘Providing we are careful, there is a strong case for increasing pension contributions.’
He said it was ‘unsustainable to remain wedded to this idea that you can still retire at 60’, saying: ‘We are all living much longer in retirement.’
Hutton’s report recommends that, to begin with, public sector workers pay an extra 1-2 per cent of their salary into their pension schemes, in order to cut government spending by £3 billion a year.
At the same time, plans should be drawn up to abolish pensions based on workers’ final salaries and to raise the age at which the pension can be paid to at least 66.
Hutton’s proposals will affect millions of workers.
Tory Chancellor Osborne described his preliminary report as ‘impressive and substantial’.
Hutton is now considering the ‘alternatives’ to the current pension scheme, before publishing his final report ahead of the Budget in Spring 2011.
He says that ‘the current system of public sector pensions cannot survive’.
‘We believe this attack on our pension schemes is an ideological attack rather than something necessitated by dealing with the deficit,’ said Dave Prentis, general secretary of Unison, Britain’s biggest public sector union with over 1.3 million members.
Paul Noon, general secretary of civil service union Prospect, said: ‘Civil servants have also been subjected to a recruitment embargo, job cuts and attacks on their terms and conditions.
‘They are in no mood to accept unfair and unwarranted attacks on their pension scheme.’
Mark Serwotka, general secretary of the Public and Commercial Services Union (PCS), said strikes would be ‘inevitable’ if Hutton’s proposals are approved by the coalition.
‘This is an issue on which there is huge sensitivity and a lot of apprehension amongst millions of public-sector workers,’ said Brendan Barber, general secretary of the TUC.
In a statement, Barber went on to say: ‘Public servants will be angered by the review’s call for them to pay more for less generous pensions.
‘Public sector workers are already facing job cuts, a pay freeze and increased workloads as they are expected to do more with less.’
Offering the government a helping hand, Barber said: ‘Public sector pensions are not gold-plated, and the report says that pensions should be linked to salary, that change should be introduced in ways that do not deter pension saving and that there should be protection for the low paid.
‘This will stop a race to the bottom.’
Hutton admitted that public sector pensions are not ‘gold-plated’, with half of retiring employees getting less than £5,600 a year and 10 per cent getting less than £1,000.
Most government workers can claim their pensions at 60 – the current retirement age for all women but five years younger than the universal retirement age for men.
But this too is set to rise, from 65 to 68.
Unison leader Prentis said: ‘We will seek to maintain, using all means possible, the agreements reached two years ago to make our public service schemes sustainable and also protect existing members of the scheme.’
Prentis also warned: ‘Plans to make public sector staff work until they drop will hit the low paid hard.’
UCU General Secretary Sally Hunt, commented: ‘Changes to pension schemes can have no legitimacy without proper consultation with a scheme’s members. . .
‘To be clear, we will defend our members’ hard-won pensions and we will work with other unions to defend pensions.’