Affordable, Viable, Decent Pension Provision - New Look Local Government Pension Scheme Proposals Announced

Published	23 November 2006

A new look Local Government Pension Scheme (LGPS) was today proposed by Local Government Minister Phil Woolas. Proposals for the scheme ensure that it is viable and fair to taxpayers who guarantee its security, whilst delivering a commitment to decent and secure pension provisions for local government employees. These reforms will help to stabilise costs, with a clear intention not to impose extra costs on council tax payers. The proposals follow detailed discussions between the local government employers and the local government trade unions.

Reforms of the LGPS are needed to ensure it meets the needs of the modern, diverse local government workforce and the challenge posed by increases in life expectancy and extended working lives. The new look scheme is also to be equality-proofed, to provide fairly for the range and variety of employments in and around local government, and compliant with anti-discrimination law. The scheme should now attract more lower paid, predominantly female, staff with short periods of local government employment and address some of the equity issues within the scheme relating to variations in pay, and full-time and part-time working.

To help deal with costs linked to increases in life expectancy and the proposed benefit improvements, the government believes it is appropriate for employee contributions to rise to meet some of this cost pressure. This helps the scheme to remain affordable for employers and fair to taxpayers.

Minister for Local Government Phil Woolas said:

"Our objective has always been to provide a viable Local Government Pension Scheme in England and Wales, flexible for both existing and future members, but also affordable to employers and fair to the taxpayers who underwrite it. These reforms will help to stabilise costs, while honouring the Government's intention to ensure that no additional costs are imposed on taxpayers.

"The proposals put forward today are the result of extensive consultations with employers, unions, and other local government stakeholders. We believe this represents a decent pension scheme providing affordable benefits to all scheme members."

Continuing the process of close engagement, Communities and Local Government today wrote to chief executives of all local authorities and to other scheme interests in England and Wales outlining the proposed changes to the scheme. The letter explains how local authorities, employers and the membership can visit a single information point /lgps for more information and examples of how the scheme changes will affect different scheme members.

Notes to Editors

1. In a Ministerial Written Statement to Parliament, marking the beginning of a statutory consultation lasting 12 weeks, Local Government Minister Phil Woolas outlined the government's proposed regulatory changes to the LGPS which will include:

Tiered employee contributions based on salary. Employees will pay 5.5 per cent on the first £12,000 of their pensionable pay, and 7.5 per cent on pensionable pay above this figure. This will produce an average employee contribution rate of 6.3 per cent across all earnings, up from the current average rate of 5.8 per cent.
A final salary scheme based on 1/60th of salary for each year of membership.
The new-look scheme will continue to offer the flexibility to commute part of the pension in order to receive a tax free lump payment.
Revised and targeted ill-health retirement package.
The extension of survivor benefits for spouses, civil partners, and children to co-habiting partners.
An increase in death in service lump sum from two times to three times salary.
A facility to make extra savings to provide a further maximum extra pension of £5,000 per year.
A framework is also to be established to manage the process of sharing of future cost pressures in the scheme.

2. The full Written Ministerial Statement can be viewed at /lgps

3. The draft regulations to give effect to the new look proposals will be available in early December.

4. The new provisions will be in place in April 2007.

5. The new look LGPS itself will come fully into effect on 1 April 2008.