1. Government policy is to encourage adequate saving for retirement and longer working lives.
   
   
2. Saving for retirement is by definition a very long term activity.  There is currently too little saving.  The GMPF Management Panel does not believe public sector pensions should be levelled down to the lowest common scheme.
   
   
3. The last decade has been an exceptionally difficult environment for pension funds for well documented reasons.  It is interesting to contrast this period with the late 1970’s through to 1999 which was an exceptionally good environment.  The nature of pensions means that changes can have long term and potentially important unintended consequences.
   
   
4. To try and generate satisfactory pensions at an affordable cost requires some investment risk to be undertaken by either employee, employer or both.
   
   
5. The starting point is agreeing what is affordable and the long benefit package that can be delivered for that cost.  The greater the stability of cost required, the lower the likely benefit package.
   
   
6. The second phase is agreeing the sharing of risk and reward or how the volatility of cost can be managed.
   
   
7. The final stage is how the benefits are distributed, i.e. what type of scheme design.
   
   
8. GMPF believes the funded nature of the LGPS helps provide stability of cost.  It is also a strong supporter of retaining defined benefit and favours the adoption of a CARE scheme (with final salary available for those that want to meet the extra cost).  The key advantage of defined benefit is that it is likely to deliver pension savings/benefits at lower cost compared to defined contribution.
   
   
9. The impact of the change in basis of calculating inflation for pension increases will result in significant reductions to the cost of future service and improvement in funding levels.  In these difficult times, if consideration is given to increasing employee contributions, an assessment of the impact of changes in scheme membership should be undertaken and the long term impact on encouraging adequate saving for retirement.

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