Local Government Pension Scheme ‘deal’ – the pluses and minuses

As members will be aware, the government and employers have been proposing to cut back on employees’ pensions. We in the trade unions have been fighting against this, and the industrial action on 30th November 2011 was able to get some concessions from the employers. The new proposals will be going to a postal ballot of Unison members from 31st July to 24th August to find out if we agree with them.

The proposals from the Government and local government employers after negotiations with UNISON and other union representatives are for a new scheme for service after 2014 (the pension for service before 2014 will remain the same as now) which will be based on average salary (rather than final salary at the moment). Staff will accrue 1/49th (2.04%) of their average salary in pension for each year of service after 2014.

Members should look at the plus and minus points of the deal before deciding whether to vote ‘Yes’ or ‘No’ when the ballot envelope comes through their letterboxes.

The plus points of the deal are:

• There are not going to be pension contribution increases for the 90% of staff who earn less than £43,000 a year

• The scheme is still better than most schemes on offer from private employers

• Staff who are outsourced to private companies will be able to remain in the pension scheme, though the details of this aspect of the new scheme remain unclear

• People’s overtime payments will count as part of their pensionable pay.

The minus points of the deal are:

• The normal pension age at which a full local government pension will be payable will go up with the state pension age. This would mean that people aged under 55 will have to work until they are 66 or even older (68 in the case of people under 35) before they could draw a full pension, as the State Pension Age itself is going to increase over the years ahead.

• If people get promoted to a higher grade or if our pay increases exceed inflation (as measured by the Consumer Price Index), as they have in most years before the current pay freeze, then this average salary scheme will result in people getting somewhat lower pensions than they would with a final salary scheme.

• While the monthly contributions have remained the same for the majority of scheme members, members will be paying them over a longer period of time as the State Pension Age goes up.

The Service Group Executive for Local Government has recommended a ‘yes’ vote.

Download a detailed PDF guide to the proposed scheme here (2 MB)