Protect our Pensions LGPS Update. Dave Watson Scottish Organiser. Don’t Panic!. Nothing happened yet (except CPI/RPI) LGPS value for money you pay (average) 6.4% of gross pay tax relief of 20% and NI saving of 1.6% actual cost 4% net. Match benefits in private scheme 25%+ salary
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Hutton 27 recommendations
Retirement age increases
Benefit changes to career average
Fair Deal/2TW – TUPE transfers and pensions
Change to the way pension increases are calculated – RPI/CPI
Scheme contribution increases
State pension & National Insurance
The UK Govt increasing public service pensions by Consumer Price Index (CPI) instead of Retail Price Index (RPI) from April 2011
CPI on average, 0.7% per year lower than RPI
Average public service pensioner loses £117 this year
Lord Hutton - a 15% cut in benefits
Not private sector schemes ‘breach of contract’
UK legal challenge
Pension benefits calculated on average service earnings rather than final salary
Hutton - final salary schemes favour high flyers
Step 1 - Earn % of salary as pension for each year you work
Step 2 –Then “re-valued” every year until you retire by a specified Index – Hutton recommended average wages
Step 3 – Add up all the “re-valued” pots at retirement and this is your final pensionable pay that is used to calculate your pension
Benefit? Depends on accrual rate & revaluation
Need 1/55th to maintain value. UK Govt 1/65th to 1/100th
UK Govt b/f State Pension Age (SPA) - from November 2018 the SPA will be 65 for both men and women
April 2020 the SPA will be 66 for both men and women. Rise to 67 between 2034-2036 and 68 between 2044-2046
Hutton - retirement should increase in line with SPA
For those now 34 or younger it would be 68.
For those between 34 and 42 it is 67.
For those between 42 to around 57 it will be 66.
Careers of 50 years plus!
Fair Deal enables TUPE transferred staff from public services to either remain in LGPS or be provided with a “certified” broadly comparable scheme.
Scotland PPP & s52 regulations.
UK Government consultation on Fair Deal. Changes to Scottish provisions for Scottish Govt.
UK Government scrapping because of the relative cost to companies bidding for public service contracts
Leave staff at the pensions mercy of private contractors
Only public sector workers in the new schemes
Improved governance & representation on LGPS investment boards.
Scottish LGPS Regs & IORP Directive
Incentives to merge LGPS funds.
CoSLA/IS project & UNISON report
UK Government cut in funding of £2.8 billion a year by 2014/15: Contributions 1.2%, 1.2%, 0.8%
This equates to a 3.2% contribution increase on average for members – a 50% increase
UK Govt: Under £15kpa no inc. £15k - £18kpa 1.5% inc.
Rest pay more than 3.2%. Based on WTE salary
Scottish Government – Barnett formula
Expected savings: NHS £137-143m. LGPS £140m
LGPS not scored against Barnett
Tax to pay back UK government debts that were raised to bail out the banks
None of the money will go into the LGPS
Threatens whole system – members opt-out
NI increase for councils, pension fund cost, welfare benefits
Not necessary in Scotland – No Barnett consequence
2008 LGPS deal – cost sharing is way ahead
Pensions costs reducing as share of GDP.
Scottish Pension Web Pages
UK Campaign Web Pages
Advice on Pensions
There is a Better way