Pension Protection action needed now!

Whilst the laying of the LGPS Benefit Regulations for England and Wales in April signalled the end of the main negotiations, a few issues remain outstanding. UNISON is lobbying hard at every level to secure a timetable for a statutory consultation on extending full protection under the Rule of 85 from 2016 to 2020.

As part of this effort we need to ensure that LGPS employers respond favourably to the Communities and Local Government (CLG) Department’s informal consultation on 2020. Only if we secure a positive response will the Local Government Minister, Phil Woolas, begin a statutory consultation on giving LGPS members in England and Wales full protection to 2020 in line with Scotland.

The deadline for responding to the CLG consultation is 13th June 2007. UNISON’s message is clear: LGPS members in England and Wales deserve equality with colleagues in Scotland.

What we have done so far

Over the last week UNISON has:

• Briefed MPs on the CLG consultation and urged them to put pressure on the Local Government Minister to deliver on his commitment to ensure fairness to LGPS members in England and Wales

• Written to LGPS employers with a briefing on our key arguments for extending full protection to 2020. We are urging them to respond favourably to the CLG consultation

• Emailed over 14,000 councillors in England and Wales calling on them to ensure that their local authority supports 2020 in its response to the CLG consultation

• Written to every LGPS pension fund manager in England and Wales with a Freedom of Information Act request for information on the true impact of extending full protection to 2020. This information will be crucial in rebutting any arguments put against extending protection on the grounds of cost.

What you can do now

It is vital that members now back up this work by lobbying MP’s, employers and councillors locally. Below is a ‘Members Briefing’ with the key points you need to raise with your MP, employer or councillors.

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MEMBERS BRIEFING ON EXTENDING PROTECTION FROM 2016 TO 2020

A Communities and Local Government (CLG) informal consulation has begun on giving LGPS members in Engand and Wales equality with members in Scotland.

Currently all qualifying LGPS members in England and Wales only have full protection under the Rule of 85 up to 31st March 2016*. For those members who fulfill the requirements of the Rule of 85 and retire between 1 April 2016 and 31 March 2020 there is a tapered protection where an actuarial reduction will apply on a tapered basis. In Scotland however members of the LGPS have been given full protection (without tapering) up until 2020. This is clearly an equality issue.

Following a commitment from the Local Government Minister Phil Woolas to ensure fairness in protection arrangements the CLG are now informally consulting on replacing the tapering in England and Wales with fulll protection to 2020. Giving equality with Scotland.

Only if the CLG receives a positive response will the Minister begin a statutory consultation on giving LGPS members in England and Wales equality with members in Scotland.

Justification for extending protection

UNISON believes that LGPS members in England and Wales should have at least the same protection as those in Scotland. In other public sector pension schemes, all members have had their pensions fully protected. While we recognise that lifetime protection might be age discriminatory in the LGPS, we believe that extending full protection to 2020 would not be. In UNISON’s view:

• There is ample scope for objective justification of extended protection under age discrimination legislation. We already have legal advice from leading counsel which says that it could be justified. We believe that achieving equity across the UK, providing stability to workers in the process of public sector reform, enabling employers to retain staff and rewarding loyalty would all provide potential objective justification.

• Since the same age discrimination laws apply in Scotland, we believe that the Government could use the same justification as the Scottish Executive, the Scottish Public Pensions Agency and the Scottish employers

• Not applying the same protection to Scotland and the rest of the UK would make cross-border staff transfers difficult to administer

• Extending full protection to 2020 would relieve the scheme of administrative burdens, would be easier to communicate to members and would make it easier for LGPS funds to calculate individuals’ benefits

• Extending full protection to 2020 would be affordable and would not create the sort of financial difficulties suggested by Terry Crossley in his letter of 16 May. There are several reasons for our view…

• The total cost of providing the current protections in the LGPS total 0.2% or 0.3% according to CLG’s informal consultation. These figures embrace the total cost of 18 months’ additional protected accrual for all existing members between October 2006 and April 2008; 8 years’ full protection for qualifying members retiring between April 2008 and 2016 and four years’ tapered protection for qualifying members between April 2016 and April 2020. It is clear therefore that replacing just four years of tapered protection would cost considerably less than the projected 0.1%

• Even if the cost of replacing taper relief to 2020 with full protection were around 0.1% of the LGPS payroll for England and Wales, using the assumptions in paragraph 3 of the CLG letter of 16 May 2007, 0.1% of pensionable payroll would only be around £25 million a year. This would be apportioned between all the 89 funds in England and Wales and the additional cost would cease after 20 years

• The CLG’s target benchmark cost for the new scheme was 20.9% for existing members and 18.3% for new members. However, the actual benchmark cost published in CLG’s Regulatory Impact Assessment of the new scheme in 2007 is lower – 20.6% for existing members and 18.2% for new members. There is therefore more than enough headroom within CLG’s target costs to achieve additional protection to 2020

• Based on the figures set out in paragraph 57 of the Regulatory Impact Assessment, the average cost quoted for new and existing members based on the "Refined Where Next?" benefit structure is 19.65% (average of 20.7% and 18.6%). In comparison, the average cost quoted for the revised scheme (as per the final regulations) is 19.4% (average of 20.6% and 18.2%). There is therefore a cost saving of 0.25% across all members

• So even if we accept that due to ‘more refined methodology’ used by GAD the bench mark is 20.7%, there is more than enough headroom according to these figures to afford the fine tuning of the protections to ensure that members of the LGPS in England and Wales are treated no worse than their colleagues in Scotland of only 0.1% of pensionable payroll

• The stakeholders have already agreed to review costs at the 2011 triennial review of funds to ascertain the extent of savings from the new 25% lump sum commutation and likely reduced level of ill health pensions. It is likely that the cost of extending protection could be mitigated by savings from other aspects of the scheme

UNISON and the other unions wish to see the new scheme implemented and to move forward with the employers and CLG with the agreement and goodwill of our members. Long-term resentment about unfair and unequal treatment will not be good for employers, Government or service users.

Responses to the CLG must be sent to no later than the 13 June 2007 to:-

Nicola Rochester
Zone 2/F7 Ashdown House
123 Victoria Street
London
SW1E 6DE

or e-mailed to nicola.rochester@communities.gsi.gov.uk

If you employer has any questions on the issues raised in this briefing please do not hesitate to contact UNISON’s LGPS Campaign Unit via email LGPS@unison.co.uk

* All employees who were members of the LGPS on 1 October 2006 will continue to accrue membership under the Rule of 85 terms until 31 March 2008.

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A summary of the new pension regulations can be found on the branch website in the May/June 2007 e-NUN
Further information on the new LGPS can be found on the pensions section of UNISON national website