Facing the Future Briefing No 107
This briefing outlines the proposals by the Scottish
Public Pensions Agency (SPPA) on the development of new pension
arrangements for local government in Scotland. This consultation
paper – Facing the Future: Propositions and Principles for an
Affordable and Sustainable Local Government Pension Scheme in
Scotland – aims to introduce a number of changes to the existing
LGPS. The consultation period runs until 20th May 2005.
The SPPA propose that the new-look LGPS could
be introduced from 2008.
New–Look LGPS Highlights
The consultation paper includes a number of core
elements which the SPPA suggest could be amalgamated with the
best ones of the current scheme to form the building block for
- A normal scheme retirement age of 65. Where benefits are paid
before this age, except on ill-health grounds, they would be
actuarially reduced to reflect the fact they are being paid
early. Benefits brought into payment after this age would be
- Benefits could accrue at 1.6% per annum, i.e. after 10 years
service a member would receive a pension based on 16% of their
- It is not intended with such an accrual rate that the Scheme
could provide an automatic lump sum, but could instead allow
members to commute part of their pension at a rate of 12:1;
in other words, for every pound of pension foregone, £12 of
lump sum would be awarded.
- Pensionable pay could be limited to basic salary. All other
payments, such as bonuses, fees, overtime and allowances, would
- Provision could be made for flexible retirement to ensure
that members could chose to make arrangements for a more gradual
approach to retirement, adjusting their work/life balance by
reducing their hours or stepping-down to a less onerous job
but, at the same time, able to draw some of their pension and
accruing further pension rights.
- Tiered iIl-health retirement benefits could be introduced,
with improved enhancement for members whose employment is terminated
on grounds of being permanently incapable of performing any
gainful employment by reason of ill-health. A second tier of
un-enhanced ill-health retirement benefits could be available
to those who are incapable of continuing in their role, but
who are capable of undertaking other employment.
- It is proposed that survivor benefits could be extended to
unmarried partners, as well as widow(er)s, registered civil
partners and children.
- Death in service benefits could be increased to three times
Some of the key elements and their implications
are highlighted below.
Raising the Normal Retirement Age
UNISON Scotland has argued against this proposal
to the current LGPS and is concerned that the same spurious arguments
about increased life expectancy have been used in this consultation.
Further details of this debate can be found in
previous P&I Briefings and Responses (see below).
Accrual Rate, Pensions & Lump Sum
UNISON Scotland would normally welcome an increase
in the accrual rate as this would help scheme members build up
a larger pension. However this change is proposed alongside other
changes affecting both pensionable pay and access to a lump sum
The decision to limit pensionable pay to basic
salary only could have an impact on a significant number of scheme
members, especially manual workers who regard shift allowances
and contractual overtime as part of their basic pay.
The new look LGPS also proposes to have no automatic
lump sum whereas the current scheme provides on equivalent to
3/80ths of pensionable pay. Although the new proposals could result
in a larger lump sum (up to 25% of the benefits accrued) there
is a resultant reduction in both the pension and survivors benefits.
UNISON Scotland is concerned about the new proposals
on ill-health. Further consultation needs to take place on this
issue. Forcing members into alternative employment when they are
incapable of carrying out their previous post seems a breach of
the pensions contract. There does not seem to be any guarantee
that employers will re-employ those who are unfit to continue
in their original posts. There are also further concerns regarding
the review of ill-health retirals which could result in cuts to
pensions and a forced return to work for many pensioners.
UNISON Scotland has campaigned on the issue of
extending these benefits to unmarried partners. However this,
as proposed by the SPPA, would lead to an increased contribution
rate by members. There are also further concerns that the proposals
only come into place on the date of any amendment and that previous
service could be ignored.
The move to a varied contribution rate with an
average level of 7% contribution raises concerns with UNISON Scotland.
While employees have contributed to the LGPS many employers have
taken contribution holidays. Any underfunding in the LGPS should
initially be met by those employers making back payments to cover
their contribution holidays. There is a further concern that the
7% contribution level is too high for low earners (this would
start at £7,000) and would result in a drop in members to the
LGPS as it becomes unaffordable, especially to the low paid.
Action for Branches
This briefing paper is intended to update members
on the proposed new look Local Government Pension Scheme in Scotland.
UNISON will continue to campaign to protect and enhance the LGPS.
Branches should be involved in the Protecting
Public Service Pensions Campaign on Friday 18th February
2005. This involves a lobby of all MPs and MSPs in Scotland to
stop the proposed changed to the LGPS and other public sector
UNISON Scotland Response to Proposed LGPS Phase 2 Changes
P&I Briefing No104: LGPS Phase 2 Amendments
UNISON Proper Pensions Campaign
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