Unions and employers have failed to find agreement over how to avoid an increase in the amount council workers pay into their pension.
Unison and GMB have rejected a Local Government Association proposal which would see the retirement age increase from 65 to 66 in order to save a third of the £900m saving which the Treasury has demanded by 2015.
Following a last-ditch attempt to produce a joint proposal, the LGA has submitted a solo submission to the Department for Communities and Local Government ahead of a consultation which was due to be launched at the end of this month.
In a letter to to communities secretary Eric Pickles, LGA chair Sir Merrick Cockell (Con) said: “It is unfortunate that, despite the efforts of both the employer and trade union negotiators, it has not so far proved possible to reach agreement on a joint proposal to put to you. However, we hope that the suggestions we have put forward in this letter will be of help to you when considering how best to take this matter forward.”
The LGA’s pensions team’s alternative to the government’s proposal - which would see contribution rates increase by an average of 3.2 percentage points per pension scheme member from April 2012 - includes a one-year increase in the normal pension age estimated to save £300m of the saving required.
It also includes a choice for members who must decide whether they would prefer a smaller contribution rate increase, which would be delayed until 2014, or a change in the ‘accrual rate’ which is used to calculate their final pension pot.
Under the LGA’s plans, those earning under £15,000 would be exempt from any increase, those earning between £15,000 and £21,000 could pay 1.5 percentage points more, and those earning more would pay between 2 and 2.5 percentage points extra.
Addressing the widespread concern that an increase in contribution rates could lead to a increasing number of people opting out of the scheme, the LGA has suggested members could keep their existing contribution rates and choose a reduced accrual rate instead meaning they would receive a slightly smaller pension when they retire.
Sir Merrick told Mr Pickles: “The fact that there is an element of choice in our proposed solution enables employees to make a decision in the light of their own personal circumstances. Giving choice will have the benefit of minimising opt-out rates.”
However, the proposal has not found favour with the unions representing many members of the Local Government Pension Scheme, and they have refused to back the plan despite the looming consultation deadline.
Heather Wakefield, Unison’s head of local government, said the £900m saving was “nothing more than a tax” on scheme members at a time when £2bn had already been saved through various changes made since 2008.
“These proposals may well be overtaken in October, when we are being asked to enter discussions on the longer-term structure of the LGPS,” she said. “We have always said that the two issues should be dealt with together in the same negotiations, within a reasonable timetable. Ministers have refused both.”
GMB’s national secretary for public services, Brian Strutton, said talks had been “constructive” and the LGA’s proposals “have some positive elements”, but the union wouldn’t be signing because it also believed the £900m was “unnecessary”.
He also warned the government would probably not include the LGA’s suggestions in its own proposal and consultation.
“These ideas are unlikely to be the ones the government officially launches for consultation in a week’s time and it will be the official proposals that we have to consider and respond to,” he said.
“Obviously whatever proposals government puts on the table for the LGPS we would discuss with our members but we have had no indication that there is any change to their hard-line stance which is why we are continuing with our ballot plans.”
A DCLG spokesman said the LGA’s proposal would be “considered carefully” and the government’s proposals will begin “shortly”.
He said: “The government recognises that the funding basis for the Local Government Pension Scheme is different. Government and local government employers are continuing in-depth discussions with unions about how we take these factors into account.
“Public service pensions will still be among the very best, with a guaranteed pension, but we must ensure that they remain affordable in the future and deliver better value for the taxpayer.
“This is a genuine consultation to which we are committed in order to try and agree a way forward with the unions and employers. While the talks are ongoing it is obviously disappointing that some unions have decided to be vocal rather than to engage.”