By Tash Shifrin
June 26, 2009
The government is ‘thinking about’ replacing council workers’ final salary pension scheme with one based on career average earnings, a senior civil servant has revealed.
Bob Holloway, policy adviser for workforce, pay and pensions at the Department for Communities and Local Government, told CIPFA conference delegates that a paper on the future of the scheme had been delayed by election purdah and the ministerial reshuffle.
He warned that the local government scheme was ‘under threat’ because of affordability concerns driven by increasing longevity and the falling value of investments in the recession.
The DCLG had considered cost sharing, and a more flexible ‘recovery period’ to help spread extra costs over a longer timescale. But redesigning the scheme was also an option.
There had been a shift in the private sector from final salary defined benefit to defined contribution schemes, he said. But he emphasised the different legal framework and timescales affecting the local government pension scheme.
‘Our ministers and the government are wedded to the view that [moving to] defined contributions is not the answer... That leaves us thinking about a career average scheme for local authority employees.’
Because the workforce ranges from part-time, low-paid workers to ‘a select band’ of highly paid senior staff, another possibility was a ‘hybrid’ of the final year’s salary and career average options, he added.
A new valuation of LGPS assets and liabilities in 2010 would be ‘pretty dire’, Holloway predicted.
If the valuation was based on the same assumptions as that in 2007, it could signal a 7% or 8% increase in employer contributions.
‘That’s just not on. It’s not liveable with. Something has to happen,’he said.
June 26, 2009
The government is ‘thinking about’ replacing council workers’ final salary pension scheme with one based on career average earnings, a senior civil servant has revealed.
Bob Holloway, policy adviser for workforce, pay and pensions at the Department for Communities and Local Government, told CIPFA conference delegates that a paper on the future of the scheme had been delayed by election purdah and the ministerial reshuffle.
He warned that the local government scheme was ‘under threat’ because of affordability concerns driven by increasing longevity and the falling value of investments in the recession.
The DCLG had considered cost sharing, and a more flexible ‘recovery period’ to help spread extra costs over a longer timescale. But redesigning the scheme was also an option.
There had been a shift in the private sector from final salary defined benefit to defined contribution schemes, he said. But he emphasised the different legal framework and timescales affecting the local government pension scheme.
‘Our ministers and the government are wedded to the view that [moving to] defined contributions is not the answer... That leaves us thinking about a career average scheme for local authority employees.’
Because the workforce ranges from part-time, low-paid workers to ‘a select band’ of highly paid senior staff, another possibility was a ‘hybrid’ of the final year’s salary and career average options, he added.
A new valuation of LGPS assets and liabilities in 2010 would be ‘pretty dire’, Holloway predicted.
If the valuation was based on the same assumptions as that in 2007, it could signal a 7% or 8% increase in employer contributions.
‘That’s just not on. It’s not liveable with. Something has to happen,’he said.
