Pension risks 'will remain, despite the Hutton report'

New recommendations in Lord Hutton's Independent Public Service Pensions report would only transfer risk, experts warn

Lord Hutton
Lord Hutton

Lord Hutton's recommendations for reform of public sector pensions go only a small way to solving the problems they cause for third sector bodies, according to pensions experts.

Hutton's Independent Public Service Pensions Commission report, published this month, recommended that employers should contribute less to public sector pensions, thus reducing costs for charities with employees enrolled in public sector schemes.

Existing rules mean that voluntary organisations must take on the expensive pensions liabilities of public sector workers if they employ them by means of a transfer of service provision, for example.

David Davison, a pensions consultant at actuary Spence & Partners, told Third Sector that most of the risk associated with transfers remained.

"Future contributions would go down, but charities would still take on historical deficits," he said. "And they would still face rising costs in the future."

John Prior, head of public sector outsourcing at actuary Punter Southall, said many local authorities were already trying to reduce the risk for charities taking on staff.

At present, when the last employee of a charity in a public sector pension scheme quits, the charity must make up a large shortfall immediately, usually calculated using much stricter criteria than the contributions required for ongoing debt, he said.

"If either they were given longer to pay, or allowed to pay it off at the same rate as their ongoing contributions, that would solve the problem," he said.

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