What is happening with the Local Government Pension Scheme?

We now have a circular from UNISON HQ concerning the negotiations with the local government employers in relation to the Local Government Pension Scheme (LGPS). This reflects an agreement in principle between unions and employers not to make any increase in pension contributions next year, and not until 2014, with negotiations about the future scheme to be introduced at that time (rather than in 2015) to continue.

None of this is certain. The Government (in the unpleasant person of Eric Pickles) has yet to agree. UNISON’s Service Group Executives (SGEs) will also have their say on 10 January – and UNISON members need to be assisted to communicate their views to SGE members.

The concession from the Government in not increasing contributions from 2012 clearly reflects the reality of the LGPS – as explained in the comments to the Government from Tory Wandsworth Council – that “any saving from increased employee contributions or reduced accrual of pensions would reduce the call on employer contributions at the next triennial valuation of the Pension Fund”.

As Wandsworth point out that “an interim valuation performed at the current time is not supported as it would be likely to increase employer contributions as investment market values have deteriorated and Gilt yields have fallen leading to a reduction in assets and an increase in liabilities”, it becomes clear that the Government’s objective – to take money from the pockets of our members in increased pension contributions in order to channel them in the cause of deficit reduction – is simply unachievable in the LGPS ahead of the triennial actuarial valuation in 2013.

Therefore, there is no point in the Government enforcing increased employee contributions in the LGPS before 2014, as such contributions would merely (horrors!) be paid into our pension scheme and not into George Osborne’s coffers.

The implications of this development require a little thought, but it is clear that the threat to the LGPS is simply postponed. Local Government workers were abandoned by the rest of the public sector in the last round of pension negotiations. If we are to learn from that error we should probably not repay that in kind on this occasion.