Councils submit pension reform proposal to Secretary of State

4 October 2011

The Local Government (LG) Group has submitted its proposals for reform of the Local Government Pension Scheme (LGPS) to ministers.

The letter to the Secretary of State for Communities and Local Government Eric Pickles sets out the LG Group's proposals on how the required 3.2 per cent savings on the cost of the LGPS can be achieved in a way which is fair to employees and affordable for the taxpayer. The key elements of the LG Group proposals are:

- No increase in employee contributions for staff earning less than £15,000, a moderate increase for those earning between £15,000 and £21,000 of 1.5 per cent and an increase of between 2 and 2.5 per cent for those earning over £21,000.

- Choice for employees by giving, for those who feel they cannot afford an increase in contributions, the option of taking a reduced pension accrual rate instead for future service from April 2014.
Raising the normal pension age from 65 to 66 from April 2014, but only for benefits built up from April 2014. Benefits built up prior to then would retain a normal pension age of 65.

- Unlike the other major public service pension schemes, the LGPS is a funded pension scheme backed up by assets and investments. This means that the LG Group has been able to come forward with a proposal for the scheme which delivers the required level of savings, other than wholly through an increase in employee contributions. It provides a solution which minimises the impact on the lower paid whilst at the same time offering choice to individuals.

Sir Merrick Cockell, Chairman of the Local Government Association, said:

"It is unfortunate that we have not been able to reach an agreement with the unions so far, but we hope constructive talks will continue. Our approach is in line with the recommendations of the Hutton Report, and is fair to staff and affordable for the taxpayer. Importantly, the approach represents a considerable improvement for local government employees on the original offer from Government, with no increase in staff contribution for the lowest paid and a significantly lower rate for others.

"The employers and unions have argued strongly that the funded Local Government Pension Scheme should be treated differently to the unfunded schemes in other parts of the public sector. We believe that the proposals we are putting forward ensure the costs of the LGPS can be met in a way that is both fair and sustainable."

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