ANYONE thinking about a worthwhile career should consider becoming a state school teacher. But do not delay. Provided you start in September at 22, you should still qualify to retire at 60 in 2045 on a good guaranteed income. Sadly, you would still have to wait a further eight years to have that topped up with the basic state pension.

By then, civil servants and MPs expect the generality of people, doubtless including lower-paid public servants, to toil on until 68. However, MPs have been absorbed into the higher echelons of the public sector; their main interest in pensions is to avoid blame by relying on “experts”. Lower-paid, mostly private sector, workers will labour into their late sixties to pay the extra taxes that will fund the British nomenklatura’s earlier, more comfortable retirement.

After 2045, public sector occupational pensions are likely to become markedly less generous. Under this more austere regime, they will still seem privileged compared with private sector workers on similar pay.

Depending on the detail of John Hutton’s planned pension legislation, public sector professionals should still retain tax relief on contributions to a guaranteed, salary-based pension. They should not have to contribute to the second state pension, let alone the proposed state-sponsored semi-compulsory stakeholder pension.

In the private sector, company pensions as we now understand them will fade away. The UK’s private occupational pension system was built up over generations to be the envy of Europe. In ten years, by taxation, by regulation and now by legislation, this Government will have destroyed it.

For the time being, at least, tax relief for all final-salary pension contributions should be maintained. However, only a small minority of new employees in a shrinking elite group of monopolistic companies with strong unions will still be able to sign up to them.

Most active private sector schemes are now of the type in which employer and employee pay into a fund invested on the stock market. Pensions depend on investment returns, annuity rates and, critically, on luck of timing. Under the Hutton dispensation, dictated by the Department for Work and Pensions via the mouth of Lord Turner of Ecchinswell, the function of these funds will be duplicated by state stakeholder pensions. Under that plan, employers, employees and tax credits will contribute 7 per cent of earnings to invested funds. The scheme will cover the lowest-paid, who need most encouragement or coercion to save. It will not, however, provide the decent retirement standard we have hitherto been urged to save for. Contributions totalling 15 per cent of pay are usually suggested to obtain something comparable to even the reduced civil service scheme. Employers usually provide at least half.

Under the Hutton regime, new employers would have no call to provide anything above the state stakeholder scheme. There will no longer be contracting-out rebates. There will no longer be full tax relief on contributions above the level of the state stakeholder plan. Yesterday’s White Paper does not need to spell this out. Lord Turner implied it; so does common sense. Why should the Exchequer offer costly tax reliefs that, by definition, are available only to the better-off.

Pensions are not an intrinsically attractive form of saving. They are inflexible, you cannot get hold of the money and you lose it all at death. Only tax relief, principally relief of income tax on contributions, makes pensions a worthwhile part of the pay package. Without tax relief, it makes better sense to pay employees directly and let them decide if they spend or save. All social obligations will be fulfilled by contributing to the third-tier state stakeholder pension.

In the private sector, all but the dwindling band of active final-salary pension schemes should, therefore, disappear by 2050 and be closed to new entrants decades earlier. Reform has been timed to draw more money into the Treasury in the early years than is needed to spend on higher state pensions. This is estimated to raise the burden on business by at least £3 billion a year. In the long run, however, most employers’ pension bills should fall.

As the system collapses, the majority of private sector employees, particularly full-time employees, will end up retiring at 68, if they can stay in work that long, on much lower pensions than they might now expect at 65. It will be almost impossible for them to work out how much they are entitled to under three completely different state schemes.

Such reforms have long-term consequences. Tony Blair’s enduring legacy may now be resentment of officials by private sector workers. Women may remember Mr Hutton as the minister who at last gave them the better pensions deal that should have been part of the last botched round of reform.

This round was meant to encourage private retirement saving to reverse the costly upward march of means-tested benefits. It will instead end the system that has financed so many millions of comfortable retirements. In return for this heavy social cost, Mr Hutton predicts, a third of pensioners will still need means-tested benefits in 2050. That is a poor bargain, but MPs will not care.

graham.searjeant@thetimes.co.uk

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