The final salary link in public service pensions is "inherently unfair" and can lead to high-flyers getting almost twice as much back in pensions than those on more modest earnings making the same contributions, Lord Hutton says.
He also said the government could make short-term savings by raising contribution rates - but warned it should have regard to protecting the low paid.
Following publication of the Independent Public Service Pensions Commission's interim report this morning, Lord Hutton said the current public service pension system has been unable to respond flexibly to changes in life expectancy over the past few decades.
According to numerous estimates, someone retiring now can expect to spend 40% of their adult life in retirement.
He noted this has driven up costs by a third in the past decade, and said these extra costs have fallen almost entirely on taxpayers.
"The final salary link in public service pensions is inherently unfair," he said.
But he said it would be wrong to brand public service schemes as "gold-plated", pointing out the average income is £7,800 a year.
"Although these figures are partly accounted for by part‐time or part‐career working these pensions provide a modest - not an excessive ‐ level of retirement income," he said.
His remarks may be seen as a veiled rebuke to deputy Prime Minister Nick Clegg, who back in June criticised "unreformed gold plated" public sector schemes following a report suggesting taxpayer spending on them could more than double by 2014/15.
Hutton's interim report said reform options to be investigated in the lead up to the 2011 Budget include switching to a career average scheme; a notional defined contribution scheme similar to that pioneered in Sweden; or adopting a collective DC scheme similar like that used in the Netherlands.
Risk sharing and hybrid models will also be considered, Hutton added.
Hutton said: "In my final report I will consider a range of alternative structures. This will include a career average alternative to the current final salary defined benefit schemes.
"Drawing upon international experience, alternatives such as Sweden's use of notional defined contribution schemes and the Netherlands' collective defined contribution schemes will be examined, as will risk sharing models, such as hybrid schemes that combine elements of defined benefit and defined contribution models."
Chancellor George Osborne charged the commission to undertake a "fundamental structural review" of both funded and unfunded public sector provision in June. At the time, the Treasury estimated unfunded public service pensions alone would cost £25.4bn in 2010/11.
The review covered 18 major public sector pension schemes, including the NHS, Teachers' and Local Government schemes.
In addition to those mentioned above, a number of smaller schemes - and many established to cover only one senior appointment - which do not specifically need to form part of the review will be required to act on the recommendations.
Hutton's full report is expected to be unveiled alongside the Budget next year.
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