So Phil Woolas has pre-empted further discussions between local government unions and employers by announcing proposals for the new Local Government Pension Scheme (LGPS). This picture of Phil appears to show him sneering at local government workers as he remembers how much more generous the MPs pension scheme is!
The LGPS scheme proposals are a mixed bag. They do include some things which the unions have long wanted (e.g. partner pensions). They also include objectives of the Government which we have long opposed (e.g. tighter restrictions on ill-health retirement.)
The headline news has to be that there is no extension of current protection arrangements for existing scheme members losing the right to retire with an unreduced pension at 60. This maintains the exclusion of LGPS members from the protection offered to other public servants. This unfairness is what provoked our strike action on 28 March and it leaves the joint trade unions with little choice but to ballot for further action.
The most fundamental change which the Government propose in respect of future service after 1 April (apart from their refusal to offer LGPS members the same deal as other public servants) is to shift from the current pension accrual rate (1/80th of final salary for each year of service plus a lump sum equivalent to three times the annual pension) to a more generous accrual rate (1/60th of final salary for every year of service) minus the guaranteed lump sum but (in line with all outher pension schemes) the right to “commute” up to 25% of the pension into a lump sum at the rate of £12 of lump sum payment for every £1 of pension commuted.
This will eventually result in a slightly more generous pension. For example, someone retiring on a final salary of £10,000 with twenty years service in a 1/60ths scheme would be entitled to a pension of £3,333 p.a. or, by using the full commutation they could reduce their pension to £2,500 to obtain a lump sum of £10,000. Under the current arrangement (1/80th accrual rate plus the guaranteed lump sum) their pension would have been £2,500 and their lump sum £7,500.
However the Government are proposing to increase pension contributions from the current level of 6% (with many former manual workers paying 5% on a protected basis) to 5.5% on the first £12,000 of earnings and 7.5% thereafter. This means that for those already paying 6% everyone earning more than £16,000 will see an increase in overall pension contributions, whilst those earning less than £16,000 will see a modest reduction (unless they are currently paying the protected 5% in which case they will also see an increase). The total pension contribution will amount to 6.3% on earnings of £20,000, 6.7% on earnings of £30,000 and 6.9% on earnings of £40,000.
Whilst the proposals could no doubt have been worse the Government’s failure to offer fair protection to LGPS members makes the overall package unacceptable as it stands. As critics of the Government have rightly pointed out, they are in a mess over this dispute and risk serious political consequences. However, the trade unions have not yet covered ourselves in glory through the tactical decisions which we have made – we need the earliest decision to press ahead with a strike ballot and the most vigorous campaign for the serious and sustained action which is required to win the dispute.
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