Newsflash - LGPS Employers submit proposals to Secretary of State
Below are the proposals being put forward by the Local Government Employers association and not necessarily those of the Wiltshire Pension Fund. These will be considered by the DCLG prior to their issuing of their proposed changes to the scheme due at the end of September which will start a 12 week consultation process.
The Chancellors response to Lord Hutton's initial report that reviewed Public Sector Pensions was to seek an increase in employee contributions of 3.2% of pay. This was to be phased in over 3 years, commencing 1st April 2012.
On 20th July, Eric Pickles, the Secretary of State for Communities and Local Government asked the Local Government Group (the employers) and trade unions to have discussions and come forward with proposals to deliver short term savings equivalent to a 3.2% increase in employee contributions. The fact that the LGPS is a funded scheme (it has assets to pay its pensions) gives it scope to consider a wider range of measures to deliver the required savings than other public sector schemes that are not funded.
Local Government Proposals
The LG Group wrote to the Secretary of State on 21st September setting out their proposals to achieve the required savings. A copy of the letter can be found on their website.
In developing their proposals, they flag the importance of trying to balance fairness and affordability to the employees and affordability for the tax payer. The changes are recommended to take effect from April 2014 and are shown in the table below.
Proposals from the LG Group to achieve the required savings
LG Group proposals to achieve the required savings |
Increase in employee contributions |
|---|---|
Full time equivalent earnings of less than £15,000 | No increase |
Full time equivalent earnings of between £15,000 and £21,000 | An increase of 1.5% |
Full time equivalent earnings of over £21,000 | An increase of 2% to 2.5% |
Alternative choices for employees
- Recognising that some employees may not be able to afford an increase in their contributions, an alternative choice for employees would be to maintain contributions at existing levels and have a lower rate of build up of pension from April 2014.
- Increase the normal age of retirement from age 65 to age 66 for benefits earned after April 2014 with benefits earned before then retaining a normal pension age of 65.
It is the funded nature of the LGPS that has helped the LG Group to come forward with these proposals.
What happens next?
The Department for Communities and Local Government are considering the proposals submitted to them. It is expected that they will publish details of proposed changes at the end of September. A 12 week exercise will follow enabling employers, trade unions, administering authorities and others to comment, during which time the LG Group and the unions intend to continue their discussions. We expect amending regulations early in 2012 that will set out the changes that are to take place over the period to 2014/15.
Any changes will only apply after the date of change
Any changes will only apply to future membership of the scheme. Benefits that scheme members have already built up prior to the date any changes take effect will be protected. The changes will not affect deferred and pensioner members of the Fund.
Next Update
We will publish a summary of the Government's Consultation development once issued by way of a Newsflash and report the changes in a newsletter to the members.
Wiltshire Pensions Fund, County Hall,Trowbridge, Wiltshire, BA14 8JN.
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