Hutton promises a "transparent and simple" pensions system for the public sector

He promised a "transparent and simple" pensions system for the public sector – appealing for help from the pensions community in making his final decisions on the future of public-sector schemes.

Hutton said: "When I took on this role, I knew pensions were an important part of the system. Public-sector pensions [schemes] have more than twice as many members as private-sector pensions.

"But I think there is a case for reform and I have suggested sensible options based on good sound principles. The public-sector pensions system must be fair to allow decent [retirement] incomes for low-paid public sector employees. There is a need for objectivity and balance.

"The cost of public-sector pensions is up by a third and we had underestimated the increase in longevity. The values of these pensions are not being shared between taxpayers and workers. High fliers in the public-sector can receive twice as much [in retirement] as low-paid workers. There is also an iron curtain between pensions in the public sector and the private sector."

But the former secretary of state for work and pensions was also quick to dispel the "myth" that public sector pensions are "gold plated". He added: "The average retirement income is £7,800 per year and these are not huge pensions. So while I celebrate the high level of pension schemes in the public sector, we can’t continue as we are."

Outlining his themes for the reform of public-sector pensions, Hutton said: "The status quo in the public sector is not dealing with the problems but we can’t switch their [final salary] pensions to defined contribution because this would increase the uncertainty of low-paid workers."

Hutton’s considerations include career-average or capped defined-benefit schemes, but he also made noises about looking at international schemes such as the defined-benefit arrangements available in Sweden. He also plans to consider a hybrid model for the public sector.

Hutton claimed his final recommendations, due to be published in the spring of 2011, would be based on four key principles. He said: "Pensions have to be affordable and sustainable – they cannot be a short-term issue. They have to be adequate and fair so staff can retire on an adequate income, not forgetting who picks up the bill.

"Pensions should not be an unnecessary barrier but they should be transparent and simple. There is a long way to go, but by using frameworks we will be explicit."

But he made an appeal to delegates: "This will not be an easy task. But I want to be inclusive and I need your views and help to find the best way forward.

"My options include looking at reforms – but I don’t want to say which one I really support. I will have to drill right down and look at all of this. I want this fixed but I have no axe to grind so there will be no fears and no favours. I need to ensure these reforms are sensibly implemented and I want to do that."

He concluded: "We know there is a problem and we can’t carry on as we are. Pensions are an emotive issue. The world is changing, bringing a whole range of challenges. If you don’t make the problem go away, it will bite you."

This article was first published on hrmagazine.co.uk