Individual talks could stave off rise in pension costs

5 Aug 11
The chief executive of one of the biggest local government pension schemes has told Public Finance that he hopes to avoid passing the planned increase in contributions on to employees in full.

By Richard Johnstone | 8 August 2011

The chief executive of one of the biggest local government pension schemes has told Public Finance that he hopes to avoid passing the planned increase in contributions on to employees in full.

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Mike Taylor, the chief executive of the London Pensions Fund Authority, said that the government’s announcement on July 18 that scheme by scheme negotiations on public-sector pension reform would begin was ‘good news’.

The government has said that negotiations, due to conclude at the end of October, will examine how to make scheme savings of £1.2bn in 2012/13, £2.3bn in 2013/14 and £2.8bn in 2014/15. This is expected to lead to a 3.2 percentage point increase in employee contributions if the savings are not found.

Taylor told PF that the move to individual negotiations recognised that the local government pension scheme was different from others as it is funded with assets of £140bn. ‘We’ve argued that a significant rise in contributions [across the board] would have made the scheme less attractive, so we are pleased negotiations are happening separately.’

He said that he hoped that the local government scheme would avoid the full increase. He said: ‘[3.2%] is what we are being asked for. Some increase in contributions may be necessary but not perhaps that level.’

He said that options that would be examined include: increasing the retirement age more quickly (it is set to rise from 60 to 65 across the public sector as part of the reforms); changing the accrual rate; or councils finding the money.

Following the announcement of the talks extension, the biggest local government union Unison said it was accelerating the planning of strikes so it could ‘move quickly and effectively, should [the talks] fail’.

 

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