Public sector staff face wait for benefits news

The government, in last week’s budget, laid out a convoluted timetable for reform of state-funded final salary arrangements.

Public staff will be given an indication of the government’s thinking when John Hutton produces his initial report on the subject in September.

But this can only offer limited information, as the overall scale of savings from a variety of cuts, including spending on public sector pensions, will not be revealed until October at the spending review.

Meanwhile Hutton’s conclusive report is not expected until immediately prior to the next budget, likely to be in March 2011.

But proposals to increase public sector scheme benefits in line with consumer price index (CPI), rather than retail price index (RPI) inflation, could cut overall liabilities by 10%, according to Hymans Robertson figures.

The consultant’s public sector chief John Wright called the plan a “harsh but understandable first step towards reducing pensions expenditure”.

He added: “The bottom line is that this is a move designed to save the exchequer a significant amount of money.

“However, it may be seen as something of a blunt instrument and its effects may be felt more intensely by those on lower pensions.”