The pension scheme: There may be trouble ahead, but don’t abandon ship!

According to a report to the Council’s Audit & Corporate Governance Committee, the number of retired staff drawing benefits from the pension scheme is soon to outnumber those employees paying in.

Primarily due to more than 500 redundancies the council has implemented since summer 2010, though the absence of recruitment, staff turnover and routine retirements are also factors, the number of active members of the pension scheme [current staff paying in] is down to about 4,000. By 2015 more people will be receiving pensions from the scheme [either former council employees or their survivors] – around 5,000 – than there are employees in the scheme. There are also about 7,000 ‘deferred’ members of the pension scheme [ex-employees who are not old enough to claim their pension yet].

Although this changed balance between beneficiaries and contributors won’t immediately affect our pensions, it poses a challenge for the council and the fund managers it pays to invest the funds – since running a pension scheme with lots of pensioners requires a different balance of investments to running one with lots of younger members who are decades off from retirement.

Members of the pension scheme will have got their annual pension forecasts recently. For each year of service before 2008, we will be getting 1/80th of our final salary plus a 3/80th lump sum and, for each year after 2008, we will be getting 1/60th of our final salary but no lump sum.

The 2011 pensions dispute has resulted in a new scheme for service from spring 2014 onwards. People will be getting 1/49th of their average salary for each year of service after that date. This deal, while not as good as the current scheme and so opposed by branch leadership, especially because of the link with the rising state retirement age, is still substantially better than what the government originally wanted to impose. In particular, more than 80% of scheme members will not have to pay more towards their pensions. And that is a direct result of the action UNISON and other union members took on 30 November 2011.

Against the background of the pay freeze and the resulting erosion in our real pay some scheme members are undoubtedly thinking about opting out. UNISON urges you to stay, since whatever its flaws the Local Government Pension Scheme offers a number of benefits and for most of us remains the best available guarantee of financial security in later life.

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