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Negotiators angered by pension cost ceiling

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Unions have warned that pensions negotiations are “bound to fail” after a further reduction to the budget for the local government scheme was revealed.

Outline plans for how the Local Government Pension Scheme should operate after 2015 are due by the end of this month. But negotiators say a lack of clarity over the cost ceiling makes the deadline “ridiculous”.

As reported by LGC, the Treasury revealed the reformed scheme should cost no more than 17.3% of the sector’s pensionable pay bill - considerably lower than the 20% level set for the NHS, civil service and teachers’ schemes.

LGC has since established the figure was reduced from an initial 18.8% because of the Treasury’s concession allowing local government to adopt smaller employee contribution increases than other public sector workforces: 1.5 percentage points compared with 3.2.

Peter Allenson, Unite national officer for local government, said: “The Treasury has placed the talks in such a straitjacket that they are bound to fail.

“There’s anger that we in the sector made a tremendous effort to get scheme-specific discussions and all it seems to have done is put the LGPS in a worse position than it would have been.”

Mr Allenson said it was not clear whether the 17.3% ceiling would even pay for the Treasury’s ideal scheme design that has been distributed to unions and employers.

Requests for further details on costs had not been met, he said, “but they are still asking for a broad outline [for the new scheme] by the end of the month”.

Brian Strutton, GMB’s national secretary for public services, left, said the timetable was “absolutely ridiculous”. “We cannot come up with reform proposals while we don’t understand what the cost ceiling is or what it will purchase,” he said.

Employers have also expressed confusion about the cost ceiling. One senior official told LGC: “I don’t think anybody fully grasps why you shouldn’t start out with 18.8% and leave the [contribution rates and other factors] to negotiations”.

A Treasury spokesman confirmed the cost ceiling had been reduced by 1.5 percentage points. “If the outcome of the consultation is that savings are delivered by a different package of measures, the local government cost ceiling will be amended appropriately,” he said.

Reform timetable

  • End October Outline design of post-2015 scheme to be submitted to the Treasury, followed by negotiations on specific design
  • 6 January DCLG consultation on a proposed 1.5 percentage point increase in employee contribution rates and temporary accrual rate to close. Changes to be come into force 2012-15 to save £900m
  • February 2012 DCLG to publish final plans for changes to deliver £900m saving by 2015
  • April 2012 £900m saving programme implemented, including contribution rate increase
  • April 2014 Design for post-2015 scheme to be finalised
  • April 2015 New scheme comes into force
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