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Protect our Pensions LGPS Update

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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Protect our Pensions LGPS Update

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  1. Protect our Pensions LGPS Update Dave Watson Scottish Organiser

  2. 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 • If opt-out • NI contributions go up • No pension • No ill health and other benefits • Unions not advising opt-out

  3. Pensions - Key Issues We Face Hutton 27 recommendations Retirement age increases Benefit changes to career average Fair Deal/2TW – TUPE transfers and pensions UK measures Change to the way pension increases are calculated – RPI/CPI Scheme contribution increases State pension & National Insurance

  4. A New State Pension • UK Govt consulted on combining the Basic State Pension with the Second State Pension and phase out Pensions Credit possibly from 2015 no decisions yet. • One flat rate State Pension of around £140 per week. • Members after the change is introduced would pay around 1.4% additional NI contributions and the employer would pay another 3.4%. • Even more pressure on reasonable pension scheme to close

  5. Pension Benefit Increases – robbing pensioners today and scheme members tomorrow 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

  6. The move away from a final salary scheme to career average 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

  7. Making us work longer 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!

  8. Fair Deal Over? – Making it cheaper to privatise 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

  9. Hutton - Scheme Governance 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 Scheme administration Fund management

  10. Contribution Increases – a pension tax to pay back the bankers debt not to support your pension 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

  11. Illustrative Contribution Increases

  12. Key Issue – Contribution Increase 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.

  13. Next Steps • UK negotiations – crunch point • Scottish Govt – pensions tax options • Find Barnett consequential elsewhere budget • Apply to NHS (& others) but not Local Govt • Spread the pain – cash transfer from Local Govt • ‘opportunity cost’ tax on Local Govt • No negotiations yet in Scotland on Hutton • Pensions campaign • Organisation – Champions & Contacts • Communication – internal & external • Industrial action if necessary

  14. Where can you find everything? Scottish Pension Web Pages http://www.unison-scotland.org.uk/pensions/index.html UK Campaign Web Pages http://www.unison.org.uk/pensions/protectour.asp Advice on Pensions http://www.unison.org.uk/pensions/index.asp There is a Better way http://www.thereisabetterway.org/

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