LGPS 2014 - additional years contract

hyubh

amandajc wrote: »

As an LGPS member I did believe that the scheme was not actually a burden on "the state" in the way that some other public sector pension funds are. The LGPS is fundamentally different from the other public sector schemes. It is a ‘funded’
scheme, with around £145bn in assets that are invested in order to pay benefits. Am I under a misconception?

The LGPS is a 'funded' pension scheme in the sense there are actual pension funds involved, i.e. the difference between contributions coming in and pension benefits paid out is invested in the stock market, property, etc. In contrast, most other public sector schemes as 'unfunded'/pay-as-you go, in which any positive difference between contributions coming in and pension benefits paid out is just reclaimed by the Treasury (this is the case with the NHS pension scheme at the moment), and conversely, any negative difference is paid for by central government, no questions asked (this is frequently the case for the police and fire schemes, the 'old' versions of which are particularly generous). A practical consequence of this is that liabilities, and therefore employer rates, are far more finely determined in the LGPS - every LGPS fund has a triennial valution, the results of which directly determine what each participating employer must pay for the next three years, relative to their relative risk to the fund.

Another difference is that the LGPS has a far higher rate of private and third sector participation than other public sector schemes. This is partly for historical reasons (since the 1950s small charities have been allowed to join, albeit under certain conditions), and partly due to more recent employment legislation which protects the pension rights of public sector employees who find themselves transferred to an outsourced provider. This means that taking what one might call a 'Trotskyist' attitude of 'the worse, the better' (*) with the LGPS would, from an anti-public sector point of view, be liable to have unfortunate consequences.

That said, a large majority of the membership remain local authority or state school ('academy') employees. As such, the employer cost of their membership is borne by the taxpayer, and most taxpayers aren't public sector employees who benefit from an open defined benefit pension scheme. Because of this, querying the costs of the LGPS is a legitimate question, even if the more dramatic 'solutions' proffered would be very foolish to pursue.

(*) That is to say, make things terrible in the short to medium term in order to encourage people to 'think radically'.

amandajc

Many thanks for your comprehensive explanation hyubh. In my experience LG colleagues recognise that their pensions are a very valuable part of their employment "package". These days this package certainly does not include either job security or much in the way of regular pay increases :-). For this reason I don't think many LG workers will be opting out of the scheme. I suppose the main problem is that there may simply be too few of us left to support it under the model you describe.

hyubh

amandajc wrote: »

For this reason I don't think many LG workers will be opting out of the scheme.

Opt out rates are suprisingly high (about 20%-25%), though that's essentially a function of how a large proportion of the potential membership are low paid part timers.

I suppose the main problem is that there will not be enough of us left to actually fund it.

Most funds are facing declining memberships yes, though it's gradual because of the employment legislation I mentioned. Also, the current government keeping state schools 'scheduled bodies' of the LGPS for their support staff despite encouraging them to opt out of local authority control helps.

More problematic is how the new scheme from April won't actually save much (if any) money - the accrual rate of 1/49 is just too generous. Keeping it at 1/60 (i.e., the rate in the current final salary scheme) would have been much better in the long run, especially as employer costs will be going up anyway with the end of contracting out...

taktikback

Actually, the new accrual rate of 1/49 is not as generous at it would appear. All it does is match the loss that would have occurred if it it had been left at 1/60ths under the new rules of the scheme. This is because the 2014 scheme is linked to your state retirement date which is likely to be at least 67 for anyone beyond the transitional arrangements for those retiring in the next 10 years.

It is pretty much neutral in that case for someone retiring at the old scheme date of 65 and taking an actuarial reduction.

hyubh

taktikback wrote: »

Actually, the new accrual rate of 1/49 is not as generous at it would appear.

It's 'generous' in the sense there's all the hassle involved in a new scheme (the employer/payroll requirements are a nightmare) yet the pension funds won't feel the benefit until a couple of decades in the future. Moreover, in the short term the combination of the underpin and minimal pay rises will see a large part of the membership actually benefiting from the new scheme. You can probably guess I'm no fan of employee rates going down for many part-time staff either...

taktikback

? employee contribution rates are barely changed for those earning less than 34,000. Not sure what you mean there...

hyubh

taktikback wrote: »

? employee contribution rates are barely changed for those earning less than 34,000. Not sure what you mean there...

Currently employee rates are banded by whole-time equivalent pay; from April it will be actual pay.

woolly_wombat

pandora205 wrote: »

They're cutting it very fine for implementing the April 2014 changes, aren't they? I'm assuming there is no more news on AVCs and lump sums, etc.

The government has at last laid before Parliament the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014.

Councillors are to be barred from future membership of the LGPS.

https://www.gov.uk/government/speeches/local-government-pension-scheme-regulations

http://www.legislation.gov.uk/uksi/2014/525/pdfs/uksi_20140525_en.pdf

ww

Dunnsdale

Am I to take it from the above link that any Additional Years Contracts taken out prior to April 2008 will carry on as normal?

Teaandscones

Dunnsdale wrote: »

Am I to take it from the above link that any Additional Years Contracts taken out prior to April 2008 will carry on as normal?

Yes

see lgpsregs website