UK - The Hutton Report is likely to revolutionise public sector pensions across the UK, consultancy Barnett Waddingham has predicted.

The review of public sector pensions by former Work and Pensions secretary Lord Hutton is due to be unveiled later this week, with some of his conclusions known through the publication of an interim report last year that criticised "fundamentally unfair" final salary schemes.

Speculation has involved a shift away from the current final salary pension scheme, with Malcolm McLean, consultant at Barnett Waddingham, predicting a move toward risk-sharing, as already found in the Netherlands.

Of Hutton's conclusions, McLean said: "He thinks that, as things stand, the cost of public sector pensions is not sustainable and members should pay more in contributions for their pensions, something the government has already accepted and is actively pursuing.

"The final proposals, assuming they continue to follow the same lines, have the potential to revolutionise public pension provision going forward and cut back on the costs which taxpayers are increasingly having to bear," he said, adding that the private pension landscape was likely to copy whatever reforms the public system introduced.

McLean warned that unions would be likely to see the change in contribution rates as a attack on public sector pensions and use it as a rallying cry to mobilise for widespread strike action.

"Hutton's proposals will be the catalyst for what many would see as totally necessary and long overdue change for public sector pensions," he said.

"But winning the battle for hearts and minds within the public sector already facing cutbacks and redundancies will be no easy task, as will the probable need for the government to face down the unions spoiling for a fight."

In other news, Aon Hewitt has called on pension schemes to put deficit reduction measures in control Pension Protection Fund levies ahead of this month's deadline for certification.

The consultancy said that sponsoring companies should consider bringing forward any deficit reducing contributions to guarantee credit is given when calculating the PPF levy for 2011-12.

Milan Makhecha, senior consultant at the firm, noted that payments no longer have to be in the shape of traditional cash payments, but can be contingent assets.

"Contingent assets are a tried and tested means of achieving a realistic levy, and many schemes can reduce their levy by half or more by putting in place an appropriate guarantee," she said.

"For example, we recently worked with a scheme that faced a levy of over £6m per year, and this was reduced to £2m by using a parent company guarantee."

Makhecha added that it was not necessary for a parent company to provide the guarantee and that any company within a group would be allowed to act, as long as it could supply sufficient evidence of the resources acting as guarantees ahead of time.

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