Add new comment

Submitted by martin on Tue, 20/12/2011 - 13:41

Click here for the Written Ministerial Statement.

Click here for Unison briefing setting out the unions' position; it consists of a short preamble and the joint statement with the local government employers.

In essence:

  • The unions are demanding that the new pension scheme be introduced quicker than the Government wanted, in 2014 rather than 2015. The point of this is to get the changes in place before the scheme is "revalued" and thus avoid a "revaluation" which declares the scheme in deficit. The issue arises because the Local Government Pension Scheme works through a "fund", a distinct pot of money into which workers and local authorities pay, which is then invested, and out of which pensions are paid. The teachers', civil service, and health schemes have no "fund". Workers' and employers' contributions go into, and pensions are paid out of, current Government revenue.
  • The unions accept three of the key demands of the Government. Pensions will be uprated for inflation by CPI rather than RPI. The pension age will rise along in line with the state pension age. Final-salary pensions will be replaced by career-average pensions.
  • The Government is also confident that the whole thing will be negotiated within its desired "cost ceiling" (though this issue does not arise with the Local Government Pension Scheme in the same way as with the others, since the scheme's revenues and payments are outside the Government's budget).
  • The unions' great hoped-for prize is that there will be zero contribution increases until 2014, and maybe zero or "minimised" contribution increases after then. (If the Government and the local government employers say in 2015 that contribution increases are unfortunately necessary after all, what position will the unions be in to fight that? A very weak one). Presumably the unions negotiated around the fact that the local government scheme already has a much higher rate of "opting out" than the others, so increased contributions, by increasing "opt-outs" even more, could worsen rather than improve the financial position of the scheme; and anyway, the contributions increase (or no increase) makes no difference to the Treasury, because the scheme's revenues and payments are outside the Government's budget.
  • The Unison document refers to an accrual rate of 1/60. Slightly better accrual rates have been conceded by the Government for the three other big schemes. But a career-average scheme needs a better accrual rate than a final-salary scheme to be of equal value (since even the least-promoted will generally have a final salary higher than career-average); and a career-average scheme depends for its value also on how the "average" is calculated, that is, how bygone years' pay is inflation-adjusted for the purpose of averaging. In other schemes the Government's "heads of agreement" include very poor inflation-adjustment calculations. In short: if the contribution increases in local government are small or even zero, that will be paid for with worse pensions.

This website uses cookies, you can find out more and set your preferences here.
By continuing to use this website, you agree to our Privacy Policy and Terms & Conditions.