The department of the environment will now begin discussions with the local authority associations and other interested parties, including the City and pension industry representatives, to determine the framework for a scheme with reduced central regulation.
On the basis of these discussions a consultation paper on proposals for change will be circulated widely later this year.
'The most effective way forward is to reduce significantly the detailed central government involvement in the present arrangements and allow local authorities more the discretion and flexibility over the pension arrangements for their employees,' Sir Paul said.
The pension entitlements of all existing members and pensioners within the present statutory framework of the Local Government Pension Scheme will be protected. At the same time, there will be scope for local government to take more control of pension affairs in the future as recommended by the efficiency scrutiny.
Statutory consultations on actual proposals are planned for 1996 with a view to the new provisions coming into force in England and Wales in 1997.