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Threat of pension contribution increase returns

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Low-paid members of the local government pension scheme could be forced to up their contributions despite a hard-won deal designed to avoid the move, the Department for Communities & Local Government has warned.

Civil servants told local government officers and union leaders at a meeting last month that the deal, which aims to shield low-paid members from increased contributions by introducing a revamped Local Government Pension Scheme a year early, was at risk because of Whitehall delays.

Minutes of an October meeting where the deal was discussed state that the DCLG “stressed the need to make timely progress or else consideration would have to return to contribution increases to meet the savings built into the free standing LGPS approach”.

Negotiators from the local government and union side have however pointed towards Whitehall delay as the main drag on the new pension scheme’s progress.

DCLG was due to publish draft scheme regulations in September to allow sufficient time for consultation ahead of them being put in place for the scheme’s 2013 valuation. Such a timescale is necessary to allow the scheme’s actuaries to take its new design into account and for the scheme to deliver the £900m savings demanded by government.

The department has however still not produced the draft deadlines- two months after the September deadline. The DCLG or Treasury have also not formally responded to a set of proposals submitted in July by unions and employers for the governance and cost management of the new scheme.

Jeff Houston, LGA’s head of pensions, said the deal to keep contribution increases to a minimum would be scuppered if draft regulations were not available for consultation before the end of the year.

“Everybody needs to realise that we have to get this done,” he said. “If we don’t, that will break the deal we have made with government that the scheme is in by 2014 [a year earlier than other public sector schemes] and we don’t have to do what the other schemes have to in terms of increasing contributions.”

LGA and union frustration with the delays within Whitehall led them to publish their proposals for reform last week without waiting for ministers to sign off the deal. These included calls that any movement beyond two percentage points or more from the target cost of 19.5% of pensionable pay of LGPS members would require changes to be made to the scheme.

Local government minister Brandon Lewis this week appeaed to responded to the growing frustration by issuing a written statement, offering reassurance that there would be a consultation “at the earliest opportunity”. A DCLG spokesman told LGC the regulations would be ready “before the end of the year so that they can be in place for next financial year”.





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