Future of the Local Government Pension Scheme

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Future of the Local Government Pension Scheme
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Secure - for now

• But public service schemes under review
• New schemes coming in April 2008
• Negotiations at critical stage
• High proportion of non joiners
• Public pension envy?

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Why did members strike over the Local Government
Pension Scheme (LGPS) on 28 March

• Thousands of members retirement plans are in
  jeopardy
• LGPS treated unfairly compared to other public
  service schemes covered by the Public Service
  Forum Agreement
• Should be no change to existing benefits without
  agreement

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What were the Public Service Forum agreed
principles?

• Existing scheme members should suffer no
  detriment in normal retirement age and benefits
• New Schemes for new staff providing defined
  benefits, pensions continuing to go up in line
  with price inflation
• Normal Retirement Age increased to 65 for new
  scheme half the savings ploughed back for
  scheme improvements

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Why does Government not apply PSF deal to the
LGPS? They say

• LGPS is funded therefore real deficits caused
  by people living longer and past under-funding
• 85 Rule breaches age discrimination Regulations

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The LGPS is no gold standard

• Good average final salary scheme
• But average pension in payment only 3,800 per
  annum. For women only 1,600 per annum
• Minimum Income level for pension credit is
  currently 5,930 per annum for a single person
• Large numbers of low paid members cant afford to
  join

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Where are we now with the LGPS?

• England and Wales
• For those who will satisfy the Rule of 85
• The Rule will remain for existing members until
  the New Scheme comes in April 2008
• Those who are 60 by 31 March 2016 will be
  protected on service up to that date
• Those 60 between 1 April 2016 and 31 March 2020
  will have the early retirement reduction tapered

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Where are we now with the LGPS?

• Scotland
• The proposed protections are better than what is
  now law in England and Wales those 60 by 31
  March 2020 will be protected on service up to
  that date

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What are the next stages?

• DCLG Discussion Paper on New Scheme for
  England and Wales - Consulting to 29 September
• Option A
• Is the existing final salary scheme i.e. pension
  builds up at the rate of 1/80th (1.25) of
  pensionable pay for each day of pensionable
  service
• Plus a lump sum of three times the pension (i.e.
  3/80ths)

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What are the next stages?

• Option B
• As requested by the TU side this option is
  included
• It is a final salary option where benefits build
  up at the rate of 1/60th (1.66) of pensionable
  pay
• There is no additional lump sum but members have
  the option to exchange some of their pension for
  cash.
• A 1/60th scheme has been proposed for the new
  Teachers and NHS Pension Schemes

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What are the next stages?

• Option C1
• Is a career average option where the benefits
  build up at the rate of 1.85 of averaged pay
• (in the paper it is expressed as a but for
  comparison purposes it is roughly equivalent to a
  1/54th)
• Each year would be revalued in line with prices
  i.e. the Retail Prices Index (RPI)
• There is no additional lump sum but members have
  the option to exchange some of their pension for
  cash

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What are the next stages?

• Option C2
• Is a career average option where the benefits
  build up at the rate of 1.65 of averaged pay (in
  the paper it is expressed as a but for
  comparison purposes it is roughly equivalent to a
  1/61th)
• Each year would be revalued in line with RPI
  plus 1.5
• There is no additional lump sum but members have
  the option to exchange some of their pension for
  cash

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What are the next stages?

• Option D
• Based on either C1 or C2 but would allow the
  member to opt for a final salary option if the
  member pays significantly higher contributions

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Negotiations Continue (1)

• TU Side initial position
• Good defined benefit scheme
• Preferred option 1/60th final salary scheme
• End discrimination against unmarried partners
• Improve death in service cover

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Negotiations Continue (2)

• TU Side initial position
• Support variable employee contributions to be
  fairer to the low paid
• Increase member representation
• Extend Admitted Body Status on outsourcing
• Equality proofed

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What is happening with other public service
negotiations

• Final Salary schemes for new members may be the
  preferred choice for most of the new schemes
• Most - but not all - schemes appear to be
  heading for two tier provision
• Discussions on future risk sharing taking place
  in some schemes
• Issues around future transfers between schemes
  not really started
• Trend to allow options for members to take a
  larger part of their benefits as cash

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Meeting Employers and Government

• Negotiations start again on 2 August
• Will continue as long as necessary
• We will press for more protection and a good new
  scheme for all members no two-tier
• GAD figures will be carefully examined

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Judicial Review

• Hearing will be 18 and 19 September
• We say that full protection is lawful and
  affordable
• If we win we expect full protection
• If we lose we will carry on negotiating

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More Industrial Action?

• We want full protection
• Or a combination of protection and scheme
  improvements which amount to it
• If final proposals not acceptable we will
  re-ballot for industrial action

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What can you do?

• Recruit new members
• Get membership records up to date
• Circulate Campaign News and briefings
• Keep an eye on the website
• Most important! Discuss new look proposals
  with members

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