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UK roundup: Local government pensions, GMB, NEST, DWP

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  • UK roundup: Local government pensions, GMB, NEST, DWP

UK – The opposition Labour party has warned that reforms to public sector pensions risk undermining the "high standards of scheme governance".

Speaking in the House of Commons as it discussed the Public Service Pensions Bill – set to legislate for changes to both the unfunded government funds and the funded Local Government Pension Scheme (LGPS) – shadow chief secretary to the Treasury Rachel Reeves criticised the government and the draft Bill for its failure to address all concerns raised by Lord Hutton during the Independent Public Service Pensions Commission.

Reeves said suggestions to legislate for greater powers of responsibility over investment management by the local authority funds' pension committees had been missed.

"Those measures would improve the efficiency and cost-effectiveness of scheme administration and ensure that public service pension schemes matched best practice in the private sector," she said.

The MP said the "ill-prepared and poorly drafted" bill threatened to "unravel" agreements reached between trade unions and local councils on the shape of the pension funds going forward.

Reeves argued that interference on part of the Treasury risked the ability to deliver on the agreements reached.

Her comments came a few hours after Brian Strutton, national secretary for public services at union GMB, warned that the draft Bill lacked an understanding of the nature of the LGPS.

"Everyone involved in the LGPS, from members to employers to actuaries to lawyers, have been left perplexed by a Bill that seems to forget that the LGPS is a funded scheme, distinct from the other public sector schemes, and plays fast and loose with some of the fundamental principles underlying the agreements reached on public service pension reform," he said.

Strutton added that proposals on managing the local pension fund pillar's costs had gone unanswered by government three months after submission, a situation that "[beggared] belief".

During the debate in the Commons, Reeves also warned that a clause in the Bill could allow for the introduction of defined contribution (DC) arrangements in future and insisted this clause should "not be a means to drive a coach and horses though the commitments the government have given".

Currently, all public sector pension benefits are based on a defined benefit (DB) structure, with the Bill proposing a shift from final salary to career average revalued earnings (CARE) for future accrual, as well as an increased employee contribution rate.

Reeves's governmental counterpart, chief secretary to the Treasury Danny Alexander, earlier in the debate addressed the shift to DC, noting that such a transition had been ruled out in Hutton's report.

"The costs of such a transition would have been enormous and very disruptive, and the recommendation on the career average revalued earnings scheme is preferable from that point of view," he said.

In other news, the Department for Work and Pensions has launched a consultation on the legislation governing the National Employment Savings Trust (NEST) in an effort to introduce an explicit reference allowing participating employers to leave the DC fund.

Consulting on a number of changes to the NEST Order, including how to address a member with several employers who therefore might exceed the fund's annual contribution limit, the department noted that the current legislation included no wording that "states or necessarily implies that an employer who participates can leave".

The consultation was therefore proposing changes so that NEST could "operate as intended" by stating that employers could voluntarily cease participation in the fund.

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