Home > News > 2011 > October 2011 > Two Local Government Pension Scheme cost cutting proposals put forward by the Department for Communities and Local Government
Two Local Government Pension Scheme cost cutting proposals put forward by the Department for Communities and Local Government
Graeme Muir, Partner at Barnett Waddingham, said:
“The Department for Communities and Local Government have put two options on the table – one where the Government’s required savings are met 50:50 from an increase in member contributions (ultimately an average increase of 1.5% of pay) and a lowering accrual rate (64ths from 2013 reducing to 65ths from 2014) and one where the savings are met one third from higher member contributions (1% increases) and two thirds from a lower accrual rate from 2014 (67ths).
“It’s now ask the audience time and whilst no-one is likely to find either option attractive we suspect the second option with a lower overall increase in member contributions and just the one change in accrual rate, but not until 2014, might be first past the post.
“Nearly one third of Local Government Pension Scheme members are in the £21k to £32k pay bracket, who under the second option will ultimately see an increase in contributions of an average 1%, taking it from 6.5% to 7.5% of pay. However to compensate for no, or less than average increases, at the lower pay ranges, those earning above £32k will see a higher proportionate increase of up to 5% of pay. Interestingly, those in the highest pay band of £150k plus would see an extra 5% increase from 7.5% to 12.5% under either proposal. This group holds only 0.05% of the membership so their votes are unlikely to make much of a difference, albeit they may have more to say than most.
“With a new and different scheme due from 2015, you have to wonder if just hanging on for another year or so would make more sense given all the resulting complication and costs of implementing these short term tweaks.”
For more information please contact
Graeme Muir or
Steph Deimbacher.