Dave Watson

1
Protect our Pensions LGPS Update

• Dave Watson
• Scottish Organiser

2
Dont Panic!

• Nothing happened yet (except CPI/RPI)
• LGPS value for money
• you pay (average) 6.4 of gross pay
• tax relief of 20 and NI saving of 1.6 actual
  cost 4 net.
• Match benefits in private scheme 25 salary
• If opt-out
• NI contributions go up
• No pension
• No ill health and other benefits
• Unions not advising opt-out

3
Pensions - Key Issues We Face

• Hutton 27 recommendations
• Retirement age increases
• Benefit changes to career average
• Fair Deal/2TW TUPE transfers and pensions
• UK measures
• Change to the way pension increases are
  calculated RPI/CPI
• Scheme contribution increases
• State pension National Insurance

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A New State Pension

• UK Govt consulted on combining the Basic State
  Pension with the Second State Pension and phase
  out Pensions Credit possibly from 2015 no
  decisions yet.
• One flat rate State Pension of around 140 per
  week.
• Members after the change is introduced would pay
  around 1.4 additional NI contributions and the
  employer would pay another 3.4.
• Even more pressure on reasonable pension scheme
  to close

5
Pension Benefit Increases robbing pensioners
today and scheme members tomorrow

• The UK Govt increasing public service pensions by
  Consumer Price Index (CPI) instead of Retail
  Price Index (RPI) from April 2011
• CPI on average, 0.7 per year lower than RPI
• Average public service pensioner loses 117 this
  year
• Lord Hutton - a 15 cut in benefits
• Not private sector schemes breach of contract
• UK legal challenge

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The move away from a final salary scheme to
career average

• Pension benefits calculated on average service
  earnings rather than final salary
• Hutton - final salary schemes favour high flyers
• Step 1 - Earn of salary as pension for each
  year you work
• Step 2 Then re-valued every year until you
  retire by a specified Index Hutton recommended
  average wages
• Step 3 Add up all the re-valued pots at
  retirement and this is your final pensionable pay
  that is used to calculate your pension
• Benefit? Depends on accrual rate revaluation
• Need 1/55th to maintain value. UK Govt 1/65th to
  1/100th

7
Making us work longer

• UK Govt b/f State Pension Age (SPA) - from
  November 2018 the SPA will be 65 for both men and
  women
• April 2020 the SPA will be 66 for both men and
  women. Rise to 67 between 2034-2036 and 68
  between 2044-2046
• Hutton - retirement should increase in line with
  SPA
• For those now 34 or younger it would be 68.
• For those between 34 and 42 it is 67.
• For those between 42 to around 57 it will be 66.
• Careers of 50 years plus!

8
Fair Deal Over? Making it cheaper to privatise

• Fair Deal enables TUPE transferred staff from
  public services to either remain in LGPS or be
  provided with a certified broadly comparable
  scheme.
• Scotland PPP s52 regulations.
• UK Government consultation on Fair Deal. Changes
  to Scottish provisions for Scottish Govt.
• UK Government scrapping because of the relative
  cost to companies bidding for public service
  contracts
• Leave staff at the pensions mercy of private
  contractors

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Hutton - Scheme Governance

• Only public sector workers in the new schemes
• Improved governance representation on LGPS
  investment boards.
• Scottish LGPS Regs IORP Directive
• Incentives to merge LGPS funds.
• CoSLA/IS project UNISON report
• Scheme administration
• Fund management

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Contribution Increases a pension tax to pay
back the bankers debt not to support your pension

• UK Government cut in funding of 2.8 billion a
  year by 2014/15 Contributions 1.2, 1.2, 0.8
• This equates to a 3.2 contribution increase on
  average for members a 50 increase
• UK Govt Under 15kpa no inc. 15k - 18kpa 1.5
  inc.
• Rest pay more than 3.2. Based on WTE salary
• Scottish Government Barnett formula
• Expected savings NHS 137-143m. LGPS 140m
• LGPS not scored against Barnett

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Illustrative Contribution Increases
Earnings increase at April 2012 increase by April 2015 Increase in contributions by April 2015 after tax relief
Up to 15000 a year None None None
18,000 a year 0.6 1.5 216 a year
30,000 a year 1.4 3.4 816 a year
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Key Issue Contribution Increase

• Tax to pay back UK government debts that were
  raised to bail out the banks
• None of the money will go into the LGPS
• Threatens whole system members opt-out
• NI increase for councils, pension fund cost,
  welfare benefits
• Not necessary in Scotland No Barnett
  consequence
• 2008 LGPS deal cost sharing is way ahead
• Pensions costs reducing as share of GDP.

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Next Steps

• UK negotiations crunch point
• Scottish Govt pensions tax options
• Find Barnett consequential elsewhere budget
• Apply to NHS ( others) but not Local Govt
• Spread the pain cash transfer from Local Govt
• opportunity cost tax on Local Govt
• No negotiations yet in Scotland on Hutton
• Pensions campaign
• Organisation Champions Contacts
• Communication internal external
• Industrial action if necessary

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Where can you find everything?

• Scottish Pension Web Pages
• http//www.unison-scotland.org.uk/pensions/index.h
  tml
• UK Campaign Web Pages
• http//www.unison.org.uk/pensions/protectour.asp
• Advice on Pensions
• http//www.unison.org.uk/pensions/index.asp
• There is a Better way
• http//www.thereisabetterway.org/