Local Government Pension Scheme opt-outs rise

28 Jan 13
More people are opting out of paying into the Local Government Pension Scheme, according to a survey by the National Association of Pension Funds.

By Vivienne Russell | 28 January 2013 

More people are opting out of paying into the Local Government Pension Scheme, according to a survey by the National Association of Pension Funds.

The fund’s Annual survey 2012 found that a quarter of LGPS respondents said their opt-out rate had increased in the past 12 months. None reported that their opt-out rate had fallen.

A third year of pay freezes, together with coming reforms to the local authority pensions, was putting ‘financial pressure’ on individual members, the NAPF said.

‘The NAPF has repeatedly cautioned on the need to balance levels of employee contributions with the risk of high opt-out rates,’ the report said.

The survey also revealed that the number of employers participating in each local authority fund had increased, from an average of 87 in 2011 to 115 in 2012. The NAPF said this was likely to reflect increased outsourcing in local government and the proliferation of academies, each of which counts as a separate employer for pension purposes.

Of the 2.2 million LGPS members covered by the survey, the majority – 38% – were active members, 31% were deferred members and 30% were pensioner members. The LGPS has a low level of pensioner members compared with private sector and other public sector schemes, where 41% of members are retired, 20% are active and 39% are deferred.

The average annual pension for an LGPS member was £4,882. Less than 0.1% of LGPS pensioners receive a pension worth £50,000 or more, an average of ten members per fund. An average of 25 members per fund received more than £20,000 a year.

In 2012, an average of 63% of investments were in equities, a slight reduction on the 66% recorded in 2011. Funds on average invested 10% in ‘other’ assets, including property, private equity, hedge funds and infrastructure, with the remainder invested in fixed-income assets.

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