Latest on Negotiations on Local Government Pension Scheme

REPORT FROM UNISON REPRESENTATIVE ON THE ESSEX
PENSION FUND AND INVESTMENT STEERING COMMITTEE

Further to the discussion of pensions at the Branch AGM I offered to provide a report on my activities on the Pension Fund on your behalf.

I was nominated by Unison in September last year to represent members of the Essex Pension Fund on the Fund Board and the Investment Steering Committee which oversees the work of the fund managers who invest on behalf of the fund. There have been 5 meetings of the Board since my appointment and I have attended 4 of these and all three of the Investment Steering Committee meetings

To put things in perspective I am an observer on both bodies, with six County Councillors, two District reps and two representatives of the unitaries, representatives of the Police and Fire Authorities, and of smaller employers ( (e.g. academies) who are all members so what I am able to achieve is limited. It is to be hoped that the current negotiations may lead to an increase in the number of and the influence of scheme member representatives.

There is a great deal of complex information to absorb and the learning curve has been quite steep but I think I’m getting there

Some conclusions I have been able to draw from my experience so far .One is that the Essex Fund in common with other LGPS funds across the country has still got more money coming in from contributions and investments than is going out in pensions and that will be the case for many years to come on most assumptions. So the argument that the current scheme is unaffordable is not true. The average pension in payment is around £4000 p.a. – hardly gold plated.

Second that the need to reform the LGPS does not come from an unexpected increase in people living longer. Pension funds have highly paid actuaries who have to revalue the funds every three years and they have taken increased life expectancy into account already. So the problem is not people living longer.

The great threat to the Pension Fund comes from the possibility that, as a result of
higher employee contributions, existing members may withdraw from the fund. A
second threat remains the Government’s desire to take £900 million from the LGPS as part of its deficit reduction policy. As the LGPS is a funded scheme with employer and employee contribution and returns from invested funds it is not clear that the LGPS’s money is legally the

Government‘s to take which differentiates the LGPS from other public sector schemes such as the teachers’ or civil service schemes.

At the moment there will be no increase in employee contributions until 2014 as the Government, employers and unions have agreed to make all the changes together in 2014 rather than some short term changes this year followed by more, longer term changes in two years’ time. Even with this agreement the time to complete the negotiations and bring in new regulations is now quite short.

Some of the comments at the AGM focussed on the likely switch of the LGPS from a final salary based scheme to a career average scheme (CARE). It is true that a CARE
scheme would be more advantageous to lower paid workers in local government who
are disproportionately women and also people taking career breaks who are also more likely to be women. In no way does a CARE scheme prevent lower paid and
women workers from making progress in their careers in local government.

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Where are we at with negotiations on the LGPS?

On 20 July, Eric Pickles, Secretary of State for Communities and Local Government, wrote to Sir Merrick Cockell, new Leader of the Local Government Group/LGG (once the Local Government Association /LGA), “inviting the Local Government Group to conduct discussions with the local government trade unions to establish a package of measures to secure the short term savings by 2014/15”. This followed negotiations on the broad outcomes of the Hutton Report led by Dave Prentis via the TUC with the Chief Secretary to the Treasury, Danny Alexander and Francis Maude, Cabinet Office Minister.

A group consisting of political group Leaders from the LGG, the Local Government Employers/LGE, a representative of CLG and the three NJC Joint Secretaries and their technical advisors has now been established to take these discussions forward. At the same time, the Policy Review Group, established after the last dispute to ensure the sustainability of the LGPS, also continues to meet. It includes CLG civil servants, actuaries, employer representatives from within and outside local government, LGPS fund managers, the three NJC unions and Aspect.

‘LGPS – Protect our Pensions’ readers will know by now that the Government has set a figure of £900 million – that would require an average contribution increase from members of 3.2% – by 2014/15 to get that level of saving. These ‘savings’ will not be ploughed back into the LGPS. Instead, they will be used to keep council tax down for the whole community up to 1 April 2015.

We have argued it is unfair that ‘savings’ to Council Tax should come from members who are trying to save for their retirement in the LGPS. The LGPS is currently ‘cash rich’ – it takes in more from contributions than it pays out in pensions – and is likely to remain so for the next 20 years. In the longer term, increasing life expectancy will place new strains on the scheme, but we have argued that these could be dealt with in other, more ‘sustainable’ ways, than a short term ‘smash and grab’ raid on LGPS members which will not benefit the scheme and may lead to many members opting out, even the government says it does not want that!

UNISON has also demonstrated that the LGPS is unique – it is a funded scheme and generates income and its membership are lower paid than those in other public sector schemes. Over 70% earn less than £21,000. Any contribution increase could therefore have a significant and detrimental impact on membership of the LGPS, which in turn could cause problems for the cash balance of some funds.

Employee contributions increase – Government’s timetable

A timetable has been put in place by the Treasury – which is the driving force in the move to increase contributions – to deal with these negotiations as follows. In UNISON’s view, this is an unrealistic and unnecessarily short timetable. It also splits off negotiations on the short-term ‘savings’ from those which have to take place on the new scheme based on the Hutton report, which the Government has asked to start in October:

9 September deadline – Local Government Group (LGG) and trade unions invited to propose ways to achieve £900 million savings from the LGPS from 1 April 2012 as proposed by the Chancellor

Government considers the basis for statutory consultation on the proposals

End of September – 12-week statutory consultation begins

Consultation completed by end December

October – cost ceiling for the LGPS is set (the limit on how much the ‘new scheme’ will cost)

Based on the cost ceiling by end of October complete the main scheme design for the new LGPS (Career Average or Final Salary, normal retirement age?)

By end of the 2011 complete discussions on the detail of the new scheme

January 2012 – Consultation responses considered and Ministers’ approval for next steps sought

February 2012 – Parliamentary stages for amending Regulations

March 2012 – Amending Regulations introduced

1 April 2012 – Amending regulations and new contribution rates

April 2014 target date for regulations being laid setting out new scheme

April 2015 current target date for new scheme starting

What has happened so far?

So far, there have been two meetings of the group involving LGG political leaders and others. The Policy Review Group also met on 15 August. These meetings have been purely exploratory, with both groups looking at all possible ways in which the savings could be made with minimal impact on members or damage to the scheme. UNISON and the other unions continue to argue that changes made to the LGPS in 2008, coupled with the Government’s unilateral shift to CPI indexing, redundancies and other scheme trends such as the decline in ill-health retirements are likely to amount to significant savings which should be set against the Government’s £900 million ‘savings’ target. The Government has said that savings from the shift to CPI have already been ‘banked’ and cannot be set against the £900 million ‘savings’ target.

Unlike in the unfunded NHS and Civil Service pension schemes, no proposals on contribution increases have so far been made, with detailed work being undertaken to look at options for change.

One of UNISON’s key concerns is that an increase in contribution rates could trigger opt-outs from the LGPS. Membership is already low within some employers and it is recognised that it needs to be maintained – and increased – to maintain a viable scheme.

What happens next?

The LGG Group will meet again on 31 August to continue discussions. In the meantime, research is being carried out on aspects of the LGPS to inform those discussions. While the Government has asked for the trade unions and employers to make joint proposals to generate the £900 million ‘savings’, it is by no means clear yet whether we will be able to achieve a joint position.

The Government has also not yet made any announcement about the ‘cost ceiling’ – the percentage of the LGPS pay bill – that should be ‘spent’ on the scheme. This will be crucial in determining the type of scheme that will be available for the future.

Reports of future discussions will be given as soon as possible after the meetings.

What can you do?

We believe that the Government’s timetable for short-term savings is unrealistic and unnecessary. We also believe that it would make far greater sense for discussions about the ‘new’ scheme for the future to take place alongside those on the ‘savings’.

We would like all Pension Contacts and Champions – as well as branches – to write to your MP’s, council leaders and councillors, seeking a sensible timetable for talks which would allow us time to properly consider all the issues and for further research to be carried out into the workings and costings of the LGPS.

Who is my MP?

If you don’t know, don’t fret! All you need to do is click on http://www.writetothem.com and put in your postcode. The name of your MP will appear!

Please write to your MP, council leader and councillors using the attached letter and ask them to put pressure on Danny Alexander, Chief Secretary to the Treasury and Francis Maude, Cabinet Office Minister to allow talks adequate time to look in depth at possible changes.

What has happened to the consultation on Fair Pensions?

The deadline has passed for the consultation on Fair Pensions – which allows contracted-out public sector workers to transfer to the LGPS under ‘admitted body’ arrangements. UNISON has argued and campaigned strongly for Fair Pensions provisions to be retained. We see no reason why those providing public services through private companies or voluntary sector organisations should not have the same access to decent pensions. We are concerned that the Government will use abolition of Fair Pensions and the Two Tier Code to push pay and conditions even further down to statutory, bargain basement levels. We will keep you updated.

Preparing for a ballot….and UNISON Pensions Summit

In the meantime, UNISON and the other LGPS unions are preparing to ballot members if it becomes clear that proposals for making the £900 million ‘savings’ or the longer term future of the LGPS are not acceptable. There will be a UNISON Pensions ‘Summit’ for leading activists and paid officials involved in the negotiations on 22 September to consider any progress and the next steps for UNISON.

Update your membership details

We need to make sure that we have your correct UNISON membership details so that we can keep you updated on LGPS – and other – UNISON issues.

You can now update your details on-line by going to UNISON website at http://www.unison.org.uk/membership/update.asp

If you have never used the ‘my details’ option before, you will need to register at https://registration.unison.org.uk/unisonb280ee89ff4c27a19dfaba5ecaa2ca26/unison1/ and will need your membership number to register.

Once you have registered, if you then wish to update anything else, you can go straight in and use your membership number and the password you created on the registration page https://my.unison.org.uk/unisonb280ee89ff4b27a1f2e32879/unison0/unison_mwu_live.php/interface/SessionLogin/

Your union needs you

We want to have a Pension Contact in every workplace who can pass round information to colleagues and provide a link with your branch and the UNISON campaign. If you aren’t one already – volunteer now! Just contact your branch secretary or e-mail your details to protectourpensions@unison.co.uk and we will add you to our mailing list.