Saturday, October 08, 2011

The cost of Option Two to members of the LGPS

Further to the last post these are the Government’s proposed contribution increases under Option Two (before tax) to save £300 Million annually by 2014/15;

These are the changes to the accrual rate under Option Two;

It is proposed that the balance of £600m would be achieved by a change in the Scheme’s accrual rate from the current 1/60th to 1/67th with effect from 1 April 2014.

For future service from 2014 onwards each year of service would be worth 1.49% of final salary on retirement as opposed to 1.67% as at present.

This reduces the value of future service for pensions purposes by 10.8% (that means that for a given amount of service and a given final salary, your pension – in respect of future service – will be 10.8% lower than it would otherwise have been.)

An employee at the top of Scale 6 in Inner London would, by 2014, be paying 15.4% more to earn 10.8% less pension than at present in respect of future service (representing about one quarter (25%) less “value for money”).

Obviously the best way to present all of this information in an accessible way would be for there to be an online LGPS pension calculator on the UNISON website, ideally before the ballot papers go out on Tuesday...

No comments: