Pensions: Employers proposals to Government for savings from Local Government Pension Scheme (LGPS)

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Circular: 2011HOC0466MW

Dear Brother/Sister

On Friday 23 September 2011 we attended the latest meeting of the Trade Unions who represent members in the Local Government Pension Scheme (LGPS) ' which applies to FBU members in Emergency Fire Controls.

This was one of a regular series of meetings where Unions meet to give and receive updates and to discuss coordinated campaigning. The main focus of this meeting however was to discuss the latest position in relation to discussions with LGPS Employers and Government on the proposed attacks on our pensions.

Members will be aware that the LGPS has been separated somewhat from the main talks on contribution increases primarily because of the fact that it is a funded scheme. Talks on contributions have been ongoing although to-date there has been no discussion on the second part of the proposals i.e. the Hutton proposals from April 2015.

A report was given from a meeting between the Local Government Group (LGG) and Union representatives on 9 September 2011 where the LGG gave a commitment to maintaining the scheme and attempting to prevent opt outs but reiterated the position of making the £900million savings between 2012 and 2014. They put this position on behalf of Local Government Employers in England and Wales.

The Treasury had previously indicated that alternative proposals to an increase in contributions may be considered but reiterated that they would still have to deliver the £900 million savings over the same timeframe.

At a further meeting on 21 September the LGG presented a number of alternative proposals for the Employee's side to consider. It is important to note that these proposals are from the Employers group only at this point and that they had not been submitted to officials from the Department for Communities and Local Government (CLG) or HM Treasury. The Employers cannot amend any rules of the scheme so these proposals would not have any standing without approval from CLG and/or the Treasury.

Employers' proposals for savings

The proposals are covered in detail in a letter to the Secretary of State by the Chair of the Employers group dated 21 September 2011 along with the associated paperwork. (This is available to view on the FBU website www.fbu.org.uk).

In summary the proposal is in 3 stages;

1. Increase retirement age from 65 to 66 from 1 April 2014 ' this would be for all future service and would impact on the rule of 85 people by also extending the working life by one year. The Employers state that this would generate £330 million.

2. Increase contribution rates on 1 April 2014 by 2-2.5% for earners over £21,000. Employees earning less than £15,000 will see no increase and those earning between £15,000-21,000 will see a 1.5% increase. The Employers state that this would generate £605 million.

3. From 1 April 2014 employees earning below £15,000 will retain an accrual of 60ths while those earning above this amount will have a worse accrual of 68ths. A certain amount of flexibility is proposed whereby those earning below £15,000 can reduce their contribution rate by opting for the worse accrual rate of 68ths while those earning above £15,000 can retain the accrual rate of 60ths by upping contribution rates.

In addition to these three main proposals consideration would be given to changing the vesting period (the period before a member is entitled to benefits from the scheme rather than re-payment of contributions) from three months to two years and to changing the actuarial reduction applied for early leavers.

(For these proposals the LGG have assumed total salary costs of £30billion).

It must be stressed that these proposals are all intended to raise the £900 million between 2012-14 and would not impact on the Hutton proposals for a new scheme being introduced by April 2015. It would however mean that there would be no changes until 1 April 2014.

The Trade Unions present on 23 September agreed that it would be advisable to await a reaction to the letter before giving any view on any of the proposals as the status of the proposals is unclear at this time.

The group also agreed to produce a further joint Union's bulletin and to write again to the Treasury highlighting that, despite their insistence to the contrary, past savings must be considered in relation to any savings target.

Scotland and Northern Ireland

It is important to note that these proposals would not affect Scotland or Northern Ireland who have devolved powers on pension issues and as such would require separate consultation processes.

To-date there has been no decision made in Northern Ireland but in Scotland the Finance Secretary John Swinney said in a statement to Scottish Parliament on Wednesday September 21 2011 as follows (our emphasis):

We believe the UK Government is taking the wrong course of action and we re-iterate our call for them to change direction. Should the UK Government refuse to change its position, the Scottish Government will have no choice but to apply the increases in Employee Pension Contributions for NHS, teachers, police and fire schemes in Scotland. We will put in place protection for the low paid and we will leave decision making on the Local Government Pension Scheme to those who manage that Scheme. We will not impose on Local Government in Scotland what the UK Government has imposed on us.

The developing position in relation to pensions is complex. It is further complicated by the impact of devolution on the discussions and on the process of decision making. Members will be provided with as much information as possible in order to ensure an informed debate on these developments.

All members are advised to attend Branch meetings to hear the latest developments on these issues and are urged to support the call for all members to prepare for industrial action should it become necessary.

Best wishes.

Matt Wrack

General Secretary

2011HOC0466MW

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