Yesterday there was an announcement that the trade unions, the LGA and the Government had come to an agreement on new proposals for the Local Government Pension Scheme (LGPS) in 2014.
If you are not in the LGPS bear with me, since this is an important issue. The LGPS has assets worth over £145 billion and collectively is the biggest pension fund in the UK and the 4th biggest in the world. It is a major shareholder in Britain and the world economy. Arguably it is the British equivalent of a Sovereign wealth fund. Over 4 million Brits are members of the LGPS with 1.6 million active members in England and Wales alone.
Why I understand that there are a lot of people who have genuine fears and concerns about these proposals there is also a lot of old nonsense being put out by the usual suspects who should know better and are just scaremongering.
I'll use a comment in a post I did yesterday from the "we don't care how good this offer is we just want to go on strike all the time to bring about the revolution" brigade to illustrate what I think about the proposals.
I will say this is early days and once we have been properly briefed on the offer and given time for it to sink in I will probably post again. Please note that is my own summary and interpretation and no-ones else's.
Q. Are we paying more?
A. No, average contribution remains at 6.5% gross. Some part time workers may well pay even less. Those earning under £43,000 per year will pay the same while those who earn more will pay a little extra but after tax relief even those who earn over £150,000 will still pay less than 7% net. At long last if you have financial problems you will be able to reduce your contributions by 50% (with reduced benefits) until things improve rather than just pulling out.
Q. Are we getting less out?
A. No, the majority of members will get more out of LGPS 2014 than the deal in 2008. The accrual rates is far better. It is also a more valuable and better scheme. Especially for the low paid. For too long we have allowed a small number of very high earners to milk our pension scheme for their own benefit. For the first time workers will also build their pensions on non contractual overtime and allowances. A real improvement to those who rely on such money.
Q. Are we working longer?
A. Yes, in line with state pension age. Many of our members earn so little that they will not be able to retire without the state pension in any case. Remember we're living longer. It's supposed to be a good thing. In return we get a world class guaranteed pension scheme. There is also a 10 year protection. There also may be scope for members to "downsize" when they are older into less stressful and demanding jobs under Career Average than Final Salary
In many ways this is unfinished business from 2008. There was no agreement reached back then about future cost sharing over longevity. It had to be sorted sooner or later. Final Salary was always unfair to the mass of our members when compared with a decent Career Average scheme. We also never could agree with the need to modernise, get meaningful member representation and consider merger to deal with the 101 different ways that the financial services industry rips us off (i.e 101 separate LGPS funds).
What I really hope is that LGPS 2014 can be an an affordable and sustainable model for pension schemes that the millions and millions of public and private sector workers who don't have any access to such security in old age. If we don't get such a model established in the private sector then the public sector schemes will always remain vulnerable.
What happens next? We ballot. Let the members decide.