'Affordable' local government pension plan submitted to Pickles

23 Sep 11
Planned increases in council workers' pension contributions could be avoided, the umbrella body of councils in England and Wales has told minsters today.
By Richard Johnstone | 23 September 2011

Planned increases in council workers’ pension contributions could be avoided, the umbrella body of councils in England and Wales has told minsters today. PensionsISTOCK

The Local Government Group’s suggestions for pension reform also propose giving the 1.81 million Local Government Pension Scheme contributors a choice to avoid paying more when contribution increases are required in 2014/15 by agreeing to a reduced accrual rate.

For those who chose to contribute more, there would be an increase in contributions of 1.5% for those earning between £15,000 and £21,000 and an increase of between 2-2.5% for those earning over £21,000. There would be no increase for anyone earning below £15,000.

The submission to Local Government Secretary Eric Pickles also states that the scheme retirement age would also increase from 65 to 66 for benefits built up from April 2014.

Unions and the LGG have been negotiating over how to meet the 3.2% in contribution increases required by the government over the next three financial years.

The LGPS is funded by £140bn of investment and assets and is being given the leeway by ministers to attempt to reach agreement through savings. This is not an option available to the other, unfunded, public sector schemes for civil servants, teachers and NHS staff, which also face contribution increases in each of the next three years.

Responding to the proposals, the largest local government union Unison said that it could not agree to the deal.
National secretary for local government Heather Wakefield said that the increase in contributions represented a £900m tax on members. The union is
moving to ballot members over pension changes.

She added: ‘Our members in the LGPS are facing attacks on their pay and conditions everywhere, local government pay has been frozen for two years and inflation is going through the roof. Increases in pension costs are the final straw.

Local Government Association chair Sir Merrick Cockell said it was ‘unfortunate’ that councils have not been able to reach an agreement with unions, but added that talks would continue on what he called a fair and affordable proposal.

‘Importantly, the approach represents a considerable improvement for local government employees on the original offer from government, with no increase in staff contribution for the lowest paid and a significantly lower rate for others.’

An LGG spokesman told Public Finance that its plan did not include other parts of the government’s planned public pension reforms, such as the move to a career average rather than final salary defined benefit, that followed the report by former Labourminister Lord Hutton. He said these would be examined in further negotiations.

The Department for Communities and Local Government said they would be considered carefully and a consultation on the government’s proposals would begin shortly.

‘This is a genuine consultation to which we are committed in order to try and agree a way forward with the unions and employers. While the talks are ongoing it is obviously disappointing that some unions have decided to be vocal rather than to engage,’ a spokesman said.

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