Local Government

1
Local Government Pension Scheme the likely
changes during a period of Pension
Crisis Glyn Jenkins Head of Pensions UNISON
2
Very secure MPs and company directors in a
class of their own free to set their own
pensions.
3
Secure for now But public schemes under
review.
4
Wobbling under pressure Many private sector
defined benefit schemes are facing reductions or
closure.
5
Slide members start falling Private sector
money purchase schemes no guarantees.
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Sliding faster Stakeholder/personal
pensions. Low or no employer contributions.
7
On the skids Eligible employees who don't join a
company scheme.
8
Poverty trap too late Includes low paid and
part-time workers without a good scheme women
not entitled to full state pension, destined to
rely on the State.
9
The government response Encourage us to save
more and work longer Outlaw ageism by 2006
abolish compulsory retirement ages Increase
the earliest date that a pension can be drawn
Increase the normal retirement age in Public
Service Schemes.
10
Basic state pension age The Government has so
far resisted calls from pressure groups including
the NAPF and the CBI to increase the basic age
above 65. Instead it will improve the
enhancement if the payment is deferred up to 70.
11

• Government White Paper
• 11 June 2003
• Confirmed commitment to raise minimum pension age
  from 50 to 55 by 2010 for all schemes.
• Confirmed intention to raise age for immediate
  unreduced pension from 60 to 65 by 2006 for all
  public service schemes.

.
12
England and Wales LGPS first to go
Regulations laid before Parliament January 2005
with effect from 1 April 2005 No immediate
pension before age 55 unless retiring on
permanent ill health. Remove the Rule of 85 for
future service. So if member retires before 65
service after 2005 will be reduced by Early
Retirement Factor.

13
LGPS the transitional protections Member who is
50 by 31 March 2005 will still be able to retire
early with employer consent before 55. Member
who is 50 by 31 March 2005 will still be entitled
to receive immediate unreduced pension if made
redundant before age 55. But cliff edge for
those below 50.
14
Transitional protections Member who is 60 before
31 March 2013 will be able to retire at 60 with
an unreduced pension if they qualify for the rule
of 85. But cliff edge for those under 60 by
April 2013. There will be similar transitional
arrangements for all public service schemes when
they change.

15
What will be the effect of change If a member
retires early in the future, pension earned after
April 2005 will be reduced by 27 (women) 33
(men) at 60 45 (women) 48 (men) at 55
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What will be the effect of change The average
pension payment in the LGPS is only 3800
pa. Without the rule of 85 the average pension is
reduced to 2546 pa for a man 2774 pa for a
woman if member retires at 60. The minimum
income level under Pensions Credit is 5460
pa. For the low paid cannot work to 65 why join
the scheme?
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• What will be the effects of change
• the low paid will not be able to retire before
  65 or have to rely on the state
• increase in ill health retirement
• for those who cannot find work up to 65 will
• suffer reduced pension if they draw it early.

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LGPS Regulations in England and Wales Why is
LGPS target date one year before other public
service schemes? Scotland can wait a year. Is
it political or is it necessary. How can we
campaign against the change?

19
Disputing the need for the increase in retirement
age Manual workers longevity has only increased
by 1.5 years in the last 30. The increase in
retirement age unlikely to lead to longer working
life Stress is a major factor for early
retirement.
20
Disputing the need for the increase in retirement
age Past underfunding and current low investment
returns mean that employer contributions could go
up on average by about 6 at the current
valuation. The saving of these changes may be in
the region of 1.5 of employer contribution. Thes
e changes alone unlikely to halt attacks on the
schemes.

21
Disputing the need for an increase in retirement
age No one will know the true situation until
after the valuation results are in later this
year. There are wide variations in employer
contributions ranging from 8 to over 20. The
few funds paying over 20 are making the loudest
noise trying to shift the blame for their poor
performance.

22
The New Look scheme Consultation on a new
scheme commenced October 2004 with a paper from
the ODPM. Target date for bringing in the scheme
is April 2008. Initial consultation on ODPM
paper ends 31 March 2005.

23
Whats in paper for the new scheme? Lower
contributions on a first band of pay to encourage
the low paid to join. Consultation on a possible
move to 1/62.5th scheme. Pensionable pay basic
pay only. Greater flexibility to earn more
pension and options on flexible
retirement. Partners pensions. Two tier ill
health retirement.

24
In an interesting world keeping a pension
promise is radical breaking it is reactionary