20 August 2004
Trades Union Congress leader Brendan Barber has urged ministers to consider alternatives to slashing council workers' pension pots before proceeding with an overhaul of town hall retirement schemes next year.
The Office of the Deputy Prime Minister is set to reform the giant Local Government Pension Scheme from April. Its aim is to help shore up the 89 constituent funds – estimated to have combined long-term deficits of £12bn – by reducing the cost to councils.
But critics claim the government has not proved that the main changes are necessary.
TUC general secretary Brendan Barber told Public Finance: 'Ministers have not as yet made the case for reform in a way that convinces public sector workers that the changes can be justified or are fair. The TUC would like to see evidence to suggest that all alternatives have been rigorously examined.'
ODPM officials estimate that around 300,000 of the 1.5 million LGPS members will be affected by the changes.
The first will raise the age at which local government workers can draw their pension from 50 to 55, while the second will withdraw the '85-year rule' allowing workers to access their pension once their combined age and years of service total 85 years.
Both changes are designed to reduce the cost of the final-salary scheme, which has drained council resources – some authorities claim council tax hikes are linked to the escalating cost of the scheme.
But the Employers' Organisation for Local Government and officials in charge of regional funds have backed the changes.
Roy Wilson, chair of the EO's pension committee, said: 'A fair balance needs to be struck between the benefits provided to scheme members and the costs which are incurred by the employers and the local taxpayers.'
Mike Woodall, head of the West Midlands Pension Fund, added: 'These changes… will help ensure the long-term sustainability of the LGPS and should be seen as sensible responses to complex funding issues.'
Opponents such as Unison believe that the changes will reduce the attraction of working in local government and prevent access to retirement funds for employees 'pushed out' of work before the official age of retirement.
It has been reported that a scheme member retiring on £14,000 per year could have their pension slashed from £7,000 per annum to around £4,700.
But ODPM and EO officials dismissed those figures as 'way off the mark'. PF understands the Treasury produced estimates of the impact at a recent Public Services Forum meeting, but the department has not disclosed them publicly.
A valuation exercise for LGPS pensions this autumn will reveal the extent of authorities' deficits or surpluses.
PFaug2004
