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Powerpoint presentation on proposed changes to LGPS
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Scotland and
Northern Ireland Discussions ongoing
But both subject to RPI > CPI change
And likely changes in future
Both included in the ballot
Remember –
LGPS not gold-plated
50% pensions < £3,000 per annum
Average pension just over £4,000
Women’s pension £2,600
Reflects low pay and part-time work
Two-year pay freeze will affect pension
CLG consultation launched Launched on 7 October
Closing date 6 January 2012
Includes CLG proposals and...
Proposals already submitted by LGG
LGG proposals can be ‘fully considered’
alongside CLG proposals
CLG has two different ‘approaches’
CLG proposals– core principles
No contribution increase for those earning
less than £15,000 full time equivalent
1.5% increase for those earning
£15 - £21,000 full time equivalent
High earners to pay progressively more
But no more than an additional 6%
CLG proposals – approach 1 Increase employee contributions
in April 2012, 2013 and 2014
to raise £450m – 1.5% savings
No increase for those paid
less than £15,000
1% for those between
£15,000 and £19,400
6% above £150,001
CLG – approach 1 (continued)
Change the accrual rate from 1/60 to...
1/64 in April 2013 and then...
to 1/65 in April 2015
Will raise further £450 million
Combined with savings from contribution
increase = £900 million
CLG approach 2 Increase employee contributions in
April 2012, 2013 and 2014
Same principles for lower paid
Will raise £300 million
Change the accrual rate from
1/60 to 1/67 in April 2014
Will raise £600 million
Combined = £900 million
Discussions with LGG UNISON, GMB and Unite
On behalf of 11 unions
Want solution – but couldn’t agree
LGG submitted proposals to SOS –
without union sign-up...
And...
CLG consultation launched 10 October
LGG proposals 1 Retirement age of 66 from 1/4/14 = £330m
savings
2 - 2.5% increase in contributions
for earners over £21,000
70% LGPS members earn < £21,000
1.5% increase for £15 - £21,000 earners
No increase for those below £15,000
Contribution savings = £605 million
LGG proposals 2 Retention of 1/60 accrual rate for
< £15,000 earners
Worse accrual rate of 1/68 for those
above £15,000
< £15,000 earners can reduce contributions
for worse accrual rate
Earners above £15,000 can pay higher
contributions to keep 1/60 accrual rate
Further possible LGG proposals
Vesting period increased from
3 months to 2 years
Active members with 3+ months but
< 2 years get deferred pension or refund
Improve actuarial reduction factors
from 4.5 - 5% to 4% for each year before
normal retirement age
LGG case study 1 FTE salary = £14,700
Current accrual rate = 1/60th
Current contribution rate = 5.8%
Assume 10 years membership by 2014
then another 10 years to retirement
Prior to changes pension = £2,450
After = £2,450 (no change)
If opts for 1/68th accrual = £2,162
LGG case study 2 FTE salary = £20,000
Current accrual rate = 1/60th
Current contribution rate = 6.5%
Assume 10 years membership by 2014 then another 10 years to retirement
Prior to changes pension = £3,333
After contribution increase of 1.5%, pension = £3,333
If opts for 1/68th accrual = £2,941
LGG case study 3 FTE salary = £42,000
Current accrual rate = 1/60th
Current contribution rate = 6.8%
Assume 10 years membership by 2014 then another 10 years to retirement
Prior to changes pension = £7,000
After contribution increase of 2.5%, pension = £7,000
If opts for 1/68th accrual = £6,176
What LGG are proposals for? Only for short-term ‘savings’ – £900m
Negotiations for long term scheme
due to start in October
LGG want no change until 2014
Net effect is the same for members
LGG wants 2014 date to avoid 2013
valuation – hence 2014 implementation
What happens next?
LGG proposals sent to CLG and Treasury
Formal consultation on CLG and LGG
proposals until 6 January
Draft regulations laid in parliament in
January
Can only be withdrawn by Sec of State or
majority of MPs ‘praying’ against
Pressure needed before January
UNISON’S response – proposals
not necessary at this point
LGPS takes in £4bn more each year
than it pays out
It will be cash rich for 15+ years
£165bn in combined fund
Invested in domestic and global economies
But... will need changes to reflect longevity
improvement at some point
Savings already made
– twice over!
£2bn saved for employers since 2008
Cost reduced from 20% - 18% payroll already
Two-year pay freeze has reduced payroll and final salary pensions of LG members
10% reduction in jobs
Fewer ill-health retirements
More lump sum commutation
No 85 rule – retirement age of 65 already
Members can’t afford extra cost
Median LG earnings – £17,000
200,000 earn < £6.50 per hour
Two-year pay freeze with no £250 in
either year for NJC workers
Below inflation increases before that
Major cuts to pay and other conditions
Many low paid not in the scheme now –
AFFORDABILITY
Danger of opt-outs High level of opt-outs could make some
funds/schemes vulnerable
But... auto-enrolment from 1 April 2012
Many employees who opted out will be
opted in to the LGPS!
Can opt-out again within 3 months
Contributions will be returned
CHAOS!!
Future discussions? We will continue discussions through the
formal consultation period
But... discussions on long-term scheme
from 2015 also start in October!!
Treasury hasn’t produced ‘cost ceiling’ yet
– so critical information missing
An employer ‘cap’ could follow later
Process disjointed and unreasonable
‘Reference scheme’
for future discussions 1
Based on Hutton Report
Covers all public pensions from 2015 and
includes:
Career average scheme (care)
Benefits to be ‘broadly as generous for low
and middle income earners as now’
But contributing for 48 years!
Reference scheme 2 NPA to be SPA – or 65 – whichever higher
CPI indexation (already implemented)
Earnings revaluation of past service
for active members
Contributions assumed 3.2% above
current weighted average
Optional lump sum commutation on
12:1 ratio (same as now)
Reference scheme 3 Ancillary benefits = those in schemes
currently open to new members
Members rejoining LGPS after > 5 years
can link new and past service
Members transferring between schemes
have continuous service
(inc transfers of re-joiners > 5 years)
No cost ceiling yet....DANGER!!
Ballot timetable 28 September – ballot notices despatched
to employers
11 October – ballot of members opens
17 October – members without ballot
papers phone UNISONdirect on
0845 355 0845
Ballot timetable 31 October noon – deadline for members
requesting ballot papers from
UNISONdirect
3 November – ballot closes at 10am
Employers and members notified of result
30 November – if ‘YES’ vote, strike action
So.....
Vote YES! We need a massive turnout...
... and a massive ‘YES’ vote
We need to send a strong message to
ministers ...
... to get the basis of the negotiations
changed
Our wider campaign Must be political as well as industrial
Vital to fill MP’s mailbags through mass
letter-writing campaign
Councillors too (many are LGPS members)
Needs to engage the public ...
... and those in the private sector
Winning the propaganda battle is key