Transcript Title of presentation

Protect our
Pensions
LGPS Update
Dave Watson
Scottish Organiser
Don’t Panic!
• Nothing happened yet (except CPI/RPI)
• LGPS value for money
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you pay (average) 6.4% of gross pay
tax relief of 20% and NI saving of 1.6% actual cost 4% net.
• Match benefits in private scheme 25%+ salary
• If opt-out
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NI contributions go up
No pension
No ill health and other benefits
• Unions not advising opt-out
Pensions - Key Issues We Face
 Hutton 27 recommendations
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Retirement age increases
Benefit changes to career average
Fair Deal/2TW – TUPE transfers and pensions
 UK measures
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Change to the way pension increases are
calculated – RPI/CPI
Scheme contribution increases
State pension & National Insurance
A New State Pension
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UK Govt consulted on combining the Basic State Pension
with the Second State Pension and phase out Pensions
Credit possibly from 2015 no decisions yet.
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One flat rate State Pension of around £140 per week.
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Members after the change is introduced would pay
around 1.4% additional NI contributions and the employer
would pay another 3.4%.
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Even more pressure on reasonable pension scheme to
close
Pension Benefit Increases – robbing
pensioners today and scheme members tomorrow
 The UK Govt increasing public service pensions
by Consumer Price Index (CPI) instead of Retail
Price Index (RPI) from April 2011
 CPI on average, 0.7% per year lower than RPI
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Average public service pensioner loses £117 this year
 Lord Hutton - a 15% cut in benefits
 Not private sector schemes ‘breach of contract’
 UK legal challenge
The move away from a final salary
scheme to career average
 Pension benefits calculated on average service
earnings rather than final salary
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Hutton - final salary schemes favour high flyers
 Step 1 - Earn % of salary as pension for each year you work
 Step 2 –Then “re-valued” every year until you retire by a specified
Index – Hutton recommended average wages
 Step 3 – Add up all the “re-valued” pots at retirement and this is
your final pensionable pay that is used to calculate your pension
 Benefit? Depends on accrual rate & revaluation
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Need 1/55th to maintain value. UK Govt 1/65th to 1/100th
Making us work longer
 UK Govt b/f State Pension Age (SPA) - from November
2018 the SPA will be 65 for both men and women
 April 2020 the SPA will be 66 for both men and women.
Rise to 67 between 2034-2036 and 68 between 2044-2046
 Hutton - retirement should increase in line with SPA
 For those now 34 or younger it would be 68.
 For those between 34 and 42 it is 67.
 For those between 42 to around 57 it will be 66.
• Careers of 50 years plus!
Fair Deal Over? – Making it cheaper to
privatise
 Fair Deal enables TUPE transferred staff from public
services to either remain in LGPS or be provided with a
“certified” broadly comparable scheme.
• Scotland PPP & s52 regulations.
 UK Government consultation on Fair Deal. Changes to
Scottish provisions for Scottish Govt.
 UK Government scrapping because of the relative cost
to companies bidding for public service contracts
 Leave staff at the pensions mercy of private contractors
Hutton - Scheme Governance
 Only public sector workers in the new schemes
 Improved governance & representation on LGPS
investment boards.
• Scottish LGPS Regs & IORP Directive
 Incentives to merge LGPS funds.
• CoSLA/IS project & UNISON report
• Scheme administration
• Fund management
Contribution Increases – a pension
tax to pay back the bankers debt not to
support your pension
 UK Government cut in funding of £2.8 billion a year by
2014/15: Contributions 1.2%, 1.2%, 0.8%
 This equates to a 3.2% contribution increase on average
for members – a 50% increase
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UK Govt: Under £15kpa no inc. £15k - £18kpa 1.5% inc.
Rest pay more than 3.2%. Based on WTE salary
• Scottish Government – Barnett formula
• Expected savings: NHS £137-143m. LGPS £140m
• LGPS not scored against Barnett
Illustrative Contribution Increases
% increase
by
April 2015
Increase in
contributions by
April 2015 after
tax relief
Up to £15000 a None
year
None
None
£18,000 a year 0.6
1.5
£216 a year
£30,000 a year 1.4
3.4
£816 a year
Earnings
% increase
at April
2012
Key Issue – Contribution
Increase
 Tax to pay back UK government debts that were raised
to bail out the banks
 None of the money will go into the LGPS
 Threatens whole system – members opt-out
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NI increase for councils, pension fund cost, welfare benefits
 Not necessary in Scotland – No Barnett consequence
 2008 LGPS deal – cost sharing is way ahead
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Pensions costs reducing as share of GDP.
Next Steps
• UK negotiations – crunch point
• Scottish Govt – pensions tax options
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Find Barnett consequential elsewhere budget
Apply to NHS (& others) but not Local Govt
Spread the pain – cash transfer from Local Govt
‘opportunity cost’ tax on Local Govt
• No negotiations yet in Scotland on Hutton
• Pensions campaign
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Organisation – Champions & Contacts
Communication – internal & external
• Industrial action if necessary
Where can you find everything?
Scottish Pension Web Pages
http://www.unison-scotland.org.uk/pensions/index.html
UK Campaign Web Pages
http://www.unison.org.uk/pensions/protectour.asp
Advice on Pensions
http://www.unison.org.uk/pensions/index.asp
There is a Better way
http://www.thereisabetterway.org/