'Golden goodbye' payouts may go on

A review was ordered after the furore surrounding the 364,205 paid to the pension fund of director of corporate resources Sue Lockwood, who took early retirement this year.

Currently East Riding Council workers aged 55 and over, with 30 years local government service, can apply for early retirement and up to five years augmented service.

A review panel has recommended cutting the pension top-ups to two years.

East Riding Council was due to meet next week to decide whether to back the changes.

But yesterday it emerged that the report would be deferred for further scrutiny, following the publication of Lord Hutton's report, which said it was "unfair" that employees could retire at 60.

The former Labour Work and Pensions Secretary said it was "unsustainable to remain wedded to this idea that you can still retire at 60" when people were living to 88 or longer.

An East Riding councillor, who declined to be named, said: "Lord Hutton has confirmed that public sector pensions are unaffordable and an unacceptable burden on the tax-paying public.

"However the council establishment still hasn't woken up and smelled the coffee."

Review panel chairman Laurie Cross insisted the proposals were fair to taxpayers and employees.

Coun Cross (Labour; Minster and Woodmansey) said they had "agonised long and hard" over the scheme: "Over 10 years there's been 150 staff who have taken advantage of the early retirement scheme and had an average pay out of just over 4,000 – that's hardly gold-plated pensions.

"If you say some aspects of the private sector pensions are inadequate and the public sector should replace it I disagree."

He added: "I do know there's a view that there shouldn't be any augmented years...I think people who've worked hard all their lives are entitled to decent renumeration.

"I don't think it's gold-plated. It doesn't allow a life of luxury. I think it is deserved and it is something that the community should be willing to pay for."

However the Taxpayers Alliance calculate that even with the changes it would still have meant Ms Lockwood receiving 145,000, "still a sizeable sum by anyone's standards."

Hull and East Riding co-ordinator of the Taxpayers Alliance Andrew Allison said it was clearly "business as usual" at County Hall. Mr Allison said: "Council employees already receive generous, taxpayer-funded pensions. If you work for 30 years, you should receive a pension based on 30 years service; not 35 or 32 years."

The Hutton Report has called for later retirements and long-term structural reform of public service pensions funds, which face a 1 trillion blackhole.

However it prompted a furious reaction from union leaders who said workers were faced with having to "work longer, pay more and get less."

The change to the number of augmented years reduces potential costs to the taxpayer by around 58 per cent. However if an average of 10 to 14 East Riding Council workers take early retirement every year until 2016, it will still cost a total of between 2m and 2.9m.

The panel is also recommending introducing a flexible retirement scheme which means people aged over 55 will be able to retire and receive their pensions then go back and work for the council – having taken a minimum of a 40 per cent reduction in their hours or pay.

The idea is to retain people's expertise for longer.

In the majority of cases there will be no added cost to the council.