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FINANCE SUPPLEMENT - UPDATING A CLASSIC

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The LGPS may be a slightly worn concept, but at least it has made great strides to rebrand over the years, says Ged...
The LGPS may be a slightly worn concept, but at least it has made great strides to rebrand over the years, says Ged Dale

The next few months should be the most important time for the Local Government Pension Scheme for a generation. I'm not alluding to the disagreement over the rule of 85, but to the next round of consultations the Office of the Deputy Prime Minister will be getting under way regarding the LGPS Mk VII, as part of their stocktake of the scheme.

Mark I was launched in 1922, Mark II arrived in 1937, Mark III arose from the 1954 Benefits Regulations and then in 1974 we had the Mark IV in the shape of the Local Government Superannuation Regulations. In motoring terms these were the great leap forward and they came with four valves per cylinder, double overhead cams and disc brakes. These lasted until 1995, via a very effective face-lifting consolidation in 1986.

Unfortunately, in the 1990s we then had the scrutiny that led to the interim Mark V 1995 Regs and then in 1997 the current Regulations came along as Mark VI. Part of the thrust of these was to simplify the scheme so they introduced one of the most complicating features ever: the rule of 85.

You are probably familiar with the common definition of simplification, but it has a lesser known secondary meaning: 'Simplify v.t. Make simple, make easy to do or understand. But note in connection with pensions: to complicate, to bewilder, to obscure.' Once you are aware of this second definition so much of what we see in the pensions field makes sense.

I have idly wondered whether after the Second World War our foreign competitors gave up hope of ever defeating us martially and decided to undermine us by more insidious means. Did our competitors place moles in Whitehall who quietly inserted needless clause after needless clause into every piece of pensions legislation, knowing that each was going to be a straw on the back of UK plc?

I'm being fanciful but, alas, it is not my imagination that the new simplified (there's that word again) government pensions regime that applies this April comes to us via several Acts of Parliament, scores of statutory instruments and - get this - over a thousand pages of guidance.

Meanwhile, by March we still didn't have the amendment regulations that will bring the LGPS into line with the new regime.

But to return to the ODPM and their next round of consultations, how long is a generation? I'm 31 years older than my son but that might be a bit longer than the average generation gap. Let's say 20 years. And if we look back we see that Marks I to IV of the scheme lasted 73 years, an average of 18.25 years each.

This sort of stability is reasonable as, over the decades, we have seen widows' pensions being introduced, then children's, then widowers' and most recently civil partners'. By stages the scheme has also lost its restrictions on membership and is now open to a relief lollipop lady, working an hour in the morning and an hour in the afternoon,as and when required, term-time only. She can pay additional contributions too.

So what we want to hear when the 2008 scheme is created is that the ODPM's LGPS division will be concentrating solely on servicing, with the Mark VIII pencilled in for 2026. It will come with sat nav, by the way.

Ged Dale Head of pensions administration, Greater Manchester Pension Fund

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