Former Labour Cabinet minister Lord Hutton has said NHS staff, teachers and police should no longer receive pensions that are based on their pay immediately before they give up work, but rather on their average salary throughout their career.
He also called for the normal age at which most public sector staff can start drawing their pension to be increased to the same as the state pension age, while members of the armed forces, police and firefighters should not be able to retire before 60.
But the proposals look set to put the government on a collision course with the unions, who have warned that millions of public sector workers are prepared to strike to protect their pensions.
Dave Prentis, General Secretary of Unison, called on the government to convene urgent talks to discuss the report, rather than "rushing" to make cuts and face industrial action.
Lord Hutton said it should be possible to introduce new career-average schemes by the end of this Parliament in 2015, although some groups, such as the armed forces and police, could have a longer transition period if needed.
He also called for a "clear cost ceiling" to be introduced for the proportion of pay that taxpayers would contribute to public sector workers' pensions.
But he said pensions that had already been accrued by staff in final salary schemes would be honoured in full.
"The current model of public service pension provision is clearly not tenable in the long-term. There is a clear need for reform," he said.
Lord Hutton added that in order to get the right structure in place for the new schemes, it was important that there was "effective dialogue" between public sector employers, workers and unions.
There are five main public sector pensions, with schemes for local government workers, the NHS, teachers, the civil service and the armed forces. There is a wide variation in contribution rates across them.
Copyright © Press Association 2011
We asked if you agree with Lord Hutton's proposals. Your comments (terms and conditions apply):
"Is the said minister taking a reduction in his pension and benefits he is getting. Start at the top salaries and do not penalised the people who worked hard to build up there pensions bills have still to be paid. No I do not agree" - Rita McGee, London
"Definitely not. On the one hand the government are saying they will introduce a flat level state pension so that part-time workers and carers (IE most women after having children) will benefit. Those same people make up a large percentage of public sector workers who are being penalised. Haven't we just had a consultation process on our pensions with all new
employees having different terms anyway" - Julie McGowan, Oldham
"I agree with Pam Jones comment. Most of us have been on low pay for many years and once again will be penalised. The goal posts are constantly being moved and not in our favour. I no longer want to work in the NHS and it won't do anything to encourage people to go into the profession" - Sarah, West Sussex
"I do not agree. Lord Hutton has compared public sector pay with the private sector. Nurses and other NHS staff are still one of the lowest paid in the public sector and they do not get large bonuses as many employees in the private sector do. One of the benefits that have attracted many of my colleagues to the caring profession is the fact that they would receive a
reasonable pension on retirement which they have paid toward in my case for nearly 40 years and by-the-way public sector employees also pay taxes. As a senior nurse my salary still does not match the years of academic and practical training that I have under taken, but I am committed to caring. It is totally unacceptable that hard working underpaid staff should be penalised in their later years" - Felicia Salmon, London
"They should stop shifting the goal post about when you can draw your NHS pension. I can't retire now until I am 63 but would like to draw NHS pension at 60 and drop my hours to spend time with my husband who will have been retired 5 yrs" - Angela Leach, Wirral
"Absolutely not. I am on a final salary pension and only 4 years off retirement. I had many years on very low pay and have been in the health service for 32 years. I am sick of being penalised for all the studying I had to do to get to the level of pay I am on. It's a disgrace" - Pam Jones, Bolton
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