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We told you recently how the Treasury Minister had announced his plans for changes to the various public sector pension schemes, including ours.
The agreement was reached following a meeting with union leaders about the implication of the proposed changes, and recognises that the LGPS is funded in a unique way within the public sector. |
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The LGPS is what’s known as a funded scheme. This means that any shortfall between contributions and benefits is funded by investments held by the various local authority funds, such as GMPF. The total of these assets is a huge £140 billion nationwide.
All other public sector pension schemes are what’s known as ‘unfunded’ schemes. This means any shortfall is funded by the Treasury – and therefore effectively the taxpayer.
At GMPF we have argued the case – together with unions, actuaries, and other relevant organisations – that given the unique nature of the LGPS, it should be treated differently to the other public sector schemes, such as the teachers’ and NHS schemes. And this was endorsed by Cabinet Office Minister Francis Maude who said:
“We recognise that the funding basis for the Local Government Pension Scheme is different, and that there are important implications for how the contributions and benefits interact, as both Lord Hutton and the unions have set out. On that basis, we have agreed to have a more in-depth discussion with local government unions and the TUC about how we take these factors into account.”
The Government’s decision was well received by Brian Strutton, GMB’s National Secretary for the public sector, who said:
“I’m pleased to have secured this and I am sure that everybody involved with the LGPS will be very pleased.”
Sir Merrick Cockell, the newly elected chair of the Local Government Association which represents council employers, also welcomed the Government’s decision to hold separate talks, saying:
“The LGPS is unique in the public sector due to its £140 billion worth of assets and investments which make it much more like a private pension scheme. While the LGA accepts the Government’s call for local government pensions to be better value for money for the taxpayer, the employers’ body is as concerned as unions about the proposed increase in employee contribution rates.”
He added: “We will continue to argue strongly against a sizable increase in worker contributions on the grounds that it could lead to employees opting out of the scheme. This would endanger the viability of a scheme which is helping 1.9 million people save toward their retirement and reducing reliance on state means-tested pensions.”
A further consideration when looking at the impact of the proposed changes, and in particular increases in employee contribution rates, is the makeup of the LGPS membership. The LGPS has more low paid members than other public sector schemes and there have been serious concerns that increased contribution rates will simply lead to members opting out, which will in itself harm the sustainability of the scheme.
Further meetings are planned for July between the Government and the unions, ahead of which unions will consider detailed Government proposals for changes to the LGPS.
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