Pensions shake up

Just when they thought it was safe, public sector workers are expected to lose their all bells and whistles final salary pensions.

In a review this week, the former Labour Cabinet minister Lord Hutton is expected to make calls for public sector pensions based on the average salary across a working life.

The proposals set out by the Independent Public Service Pensions, which are rumoured to include a recommendation to raise contributions 3% annually, are expected to be welcomed by Chancellor George Osborne – though not those who want the public sector to be brought into line with the private sector.

Currently, if a public sector worker started out on a salary of £20,000 and retired 40 years later on £60,000, that salary having increased £1,000 every year, then that worker would receive a proportion of £60,000. In a career average scheme, that worker would receive a proportion of £40,000 each year after retirement.

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