UK - The UK government has agreed several key principles for the reform of the Local Government Pension Scheme (LGPS), with a contribution ceiling of 20.4% confirmed by the Treasury.
Speaking in the House of Commons, the chief secretary to the Treasury Danny Alexander outlined details of the agreements reached between the exchequer and unions regarding the unfunded NHS, teachers and civil service pension schemes and the funded LGPS. He also announced that the government would continue to with its Fair Deal policy - recently a matter for consultation - allowing public sector workers whose departments are outsourced to the private sector to continue receiving state-linked benefits. Alexander praised the Independent Public Service Pensions Commission report published by Lord Hutton earlier this year as “magisterial”, saying the government had remained close to the recommendations made by the former Labour MP during negotiations. Addressing the reforms agreed for the funded local government schemes, Alexander said: “The local government association and the trades unions have agreed the pension age in the new scheme will be linked to the state pension age, and that their preference is to deliver a career-average scheme.” He added that further negotiations to agree the exact detail of reforms would conclude within the next three months - with parties having already agreed that any scheme reforms will happen within the financial framework laid out by the Treasury. Changes proposed for the NHS Pension Scheme, the Teacher’s Pension Scheme and Principal Civil Service Pension Scheme in England and Wales include more beneficial accrual rates than previously offered - 1/54th, 1/57th and 1/44th, respectively - with all funds now bound to a firm cost cap. “All of these agreements include a cap on taxpayer costs at 2 percentage points above or below the scheme valuation,” Alexander said. “This cap is symmetrical, so employees will benefit if costs fall. “As Lord Hutton made clear, with the other aspects of reform now agreed, there is no reason to believe that, under normal circumstances, this cap will be used. It is there as protection for taxpayers and for workers if extraordinary, unpredictable events occur.” Commenting on today’s announcement, Barnett Waddingham’s Graeme Muir said: “Given the key perception in this dispute about having to apparently pay more for less, we always wondered why the government seemed to overlook the easy option of a higher accrual rate with a lower revaluation rate, which would mean more for more, at least in the short term, and all affordable within the agreed cost envelope.” He added: “We await the proposals for the LGPS with interest - our silver sixpence is on an accrual rate beginning with a 5.”