The UNISON Scotland Submission
To the Scottish Public Pensions Agency on the ‘Proposed
changes to the Local Government Pension Scheme in Scotland'.
UNISON Scotland takes proper pension provision
very seriously, with considerable time and resources spent
on negotiating, lobbying and campaigning for the defence of
public service schemes.
For UNISON Scotland's members, pensions represent
the most important condition of employment after pay itself.
Pension is deferred pay that will enable workers to survive
into old age and, hopefully, to avoid poverty for most of
UNISON Scotland is strongly opposed to the
proposed changes to the LGPS advocated by the SPPA, which
would have the effect of downgrading the future value of the
scheme and decreasing the pension expectations of thousands
of hardworking public service workers.
UNISON Scotland is concerned that forcing
employees to work until they are 65 does not address the real
issues affecting why employees retire early.
UNISON Scotland believes that abolishing the
85-year rule will discriminate against women and low paid
employees, as they are more likely to experience future pensioner
UNISON Scotland is concerned that restrictions
on early retirement may have the result of making it more
difficult for LGPS employers to recruit and retain, on account
of the perceived decrease in the generosity of the scheme.
UNISON Scotland believes that it is unacceptable
for SPPA to propose changes to LGPS on grounds of cost before
the results of the next actuarial valuation is known and available
for public analysis.
UNISON Scotland believes that there are significant factors
(such as the proportion of employees in the public sector, lower
average earnings etc) to justify the SPPA rejecting these proposed
amendments to the LGPS in Scotland.
This paper constitutes UNISON Scotland's response
to the Scottish Public Pensions Agency (SPPA) consultation paper
on the ‘Proposed Changes to the Local Government Pension Scheme
UNISON is Scotland's largest trade union representing
around 150,000 members working in the public sector in Scotland.
UNISON Scotland welcomes the opportunity to respond
to this consultation exercise.
The Scottish Public Pensions Agency (SPPA) is currently
consulting on introducing draft amendment regulations covering the
Local Government Pension Scheme (LGPS) in Scotland. These changes
replicate what has happened to the LGPS in England and Wales.
The SPPA aims to bring the LGPS in Scotland into line
with UK Government policy on occupational pensions. The two main
issues affecting the LGPS with these amendments would result in
the normal retirement age being increased to 65 while the minimum
retirement age would rise to 55.
For UNISON Scotland's members, pensions represent
the most important condition of employment after pay itself. Pension
is deferred pay that will enable workers to survive into old age
and, hopefully, to avoid poverty for most of their retirement. In
addition, it is seen as the primary method of protecting against
leaving work early on either ill health or redundancy, and of providing
for partners and dependants in the event of death.
UNISON Scotland is therefore strongly opposed to the
proposed changes to the LGPS advocated by the SPPA, which would
have the effect of downgrading the future value of the scheme and
decreasing the pension expectations of hundreds of thousands of
hardworking public service workers who have made substantial contributions
to the pension funds. We believe that the proposals, if implemented,
would undermine the trust of public service workers in the Scottish
and UK Government's commitment to providing them with good occupational
pensions, and would lead to an increase in poverty and dependence
on means-tested state benefits in retirement. In addition, we are
concerned that the proposals would worsen current recruitment and
retention problems for LGPS employers in Scotland.
UNISON is of course aware of the withdrawal from responsibility
for occupational pension provision that has taken place amongst
private sector employers, as manifested by the widespread closure
of final salary schemes and the downgrading of scheme benefits.
However, we believe that the UK Government and Scottish Executive
should respond by setting a positive example to the private sector
by maintaining a high standard of occupational pension provision
for public service workers, not by cutting back their future pension
Proposal to increase the normal retirement age
UNISON Scotland supports the principle that public
service workers who wish to work for longer should be able to do
so. However, we believe that rather than seeking to raise retirement
ages by imposing financial penalties on hard working public service
workers, the Scottish Executive should encourage workers to stay
on for longer by tackling the work-related reasons why public service
workers do not always want to work on until the age of 65.
According to the results of UNISON's 2003 survey of
local government workers:
• less than a fifth of local government workers
feel that the work they do is recognised and fully reflected
in their pay/grading;
• of those local government workers who had considered
leaving within the last 12 months, 72% cited low morale and
stress as a cause;
• over three fifths of local government workers
disagree or strongly disagree that their job offers plenty of
scope to gain skills and get promotion;
• just under fourth fifths of workers have caring
• over 60% of workers in local government experience
problems in balancing their job with their domestic or family
One of the key conclusions of this research is that
the main motivation for deciding to retire is generally personal
or work-related in nature, with financial considerations tending
to play the role of a constraining rather than a driving force.
It would follow from this that the best way to increase
retirement ages is to address the factors that cause people to want
to give up work, supporting UNISON Scotland's contention that the
UK Government, the Scottish Executive and employers should focus
on tackling the work related reasons why public service workers
do not always work on until the age of 65. While welcoming the UK
Government's intention to bring forward legislation affecting age
discrimination at work in 2006, it has to be realised that similar
legislation affecting equal pay was introduced in 1972 but a gender
pay gap still exists. Thus any age discrimination legislation will
take some time to be fully implemented.
In view of the above evidence, UNISON Scotland believes
that if the UK Government and the Scottish Executive wish to increase
the working life of public service workers, the appropriate way
of doing so is to work together with public service employers and
the trade unions to develop and implement a comprehensive strategy
to eliminate the negative aspects of working in the public services.
Amongst other measures, this should include: better action to reduce
stress; better work-life balance and flexible working options; the
elimination of low pay; better occupational health policies; and
tougher action to clamp down on age discrimination.
Proposed abolition of the rule of 85
UNISON Scotland is strongly opposed to the proposal
to remove the rule of 85 for future service beyond 1st April 2006
as proposed by the SPPA. We believe that this would lead to unacceptable
decreases in the length of retirement for thousands of public service
workers, and would result in increased poverty and reliance on means-tested
benefits. In addition, we are concerned that the proposed transitional
measures will give protection only to those workers within 8 years
of retirement, leaving thousands of other workers close to 60 with
significantly worse retirement prospects and little time over which
to make additional pension provision.
The abolition of the rule of 85, if implemented, will
mean that workers who retire below the age of 65 will face a substantially
increased chance of poverty in retirement and of being forced to
depend on means-tested benefits. Under the proposed change, workers
who retire at age 60 and who now qualify for an unreduced pension
as a result of the rule of 85 would see their pension reduced by
as much as 30%.
UNISON Scotland believes that the impact of a reduction
in pension income, as a result of the abolition of the rule of 85,
would discriminate against women and the low paid since it is these
groups who are most vulnerable to future pensioner poverty, and
whose pensions are likely to be closest to the level of the minimum
income guaranteed by the Pension Credit. In particular, we are concerned
that a reduction in pension income would have an adverse and disproportionate
impact on low-paid, part-time workers in the scheme, the vast majority
of whom are female, and many of whom have low state pension entitlements.
In UNISON Scotland's view, it is also highly regrettable
that the SPPA should propose abolishing the rule of 85 so soon after
the Preston judgement. As a result of that judgement, many more
female part-time workers will benefit for the first time from the
rule of 85, as a result of being awarded backdated pension rights
for the period over which they were unlawfully excluded from the
LGPS. These workers would receive it extremely poorly if, just at
the point that stand to gain from the rule of 85, it is withdrawn
by the SPPA for all future pension service.
As well as leading to a drop in retirement income
for those workers who retire before 65, the abolition of the rule
of 85 would also have a harmful impact on those workers who feel
that as a result of the change they can no longer afford to retire
at 60 and must go on working until 65. We know that in many cases
public service workers who retire at 60 choose to do so for reasons
relating to excessive levels of stress or to feelings of low morale
and a lack of recognition and reward. Unless the underlying causes
of such problems are addressed, it is likely that workers who stay
on for financial reasons until the age of 65 will suffer from high
levels of ill health and low productivity, leading to increased
ill-heath retirement rates and lower standards of service performance.
Insofar as the abolition of the rule of 85 has the
effect of making employees stay on at work, the Government should
also take into account the effect on the overall workforce composition.
The objective of a skilled and flexible workforce will be hindered
if more staff stay on until 65, preventing local authorities and
other employers from taking on more school leavers or graduates
in their place.
UNISON Scotland believes that the abolition of the
rule of 85 will lead to an unacceptable decrease in the length of
retirement for many public service workers. We do not agree that
the abolition of the rule of 85 is reasonable in view of increases
in life expectancy: whilst life expectancy has increased significantly
for the highest socio-economic groups, the life expectancy gains
experienced by public service workers have been much smaller. Between
1972 and 1999 the life expectancy at age 65 of men in occupational
class IV rose by only 1.5 years, far short of the additional five
years that many workers will have to work to obtain an unreduced
pension if the rule of 85 is abolished. In addition, life expectancy
is sharply below the average in certain areas of the UK; for example
eight of the 10 local authority areas with the worst life expectancy
rates for males are in Scotland. Also improvements in the number
of years spent in good health have not kept pace with improvements
in life expectancy.
UNISON Scotland does not accept that there is any
need to abolish the rule of 85 as a result of the coming into force
of the age-related provisions of the European Employment Directive
2000/78/EC. Article 6 of the Directive allows Member States to provide
that ‘the fixing for occupational social security schemes of
ages for admission or entitlement to retirement or invalidity benefits,
including the fixing under those schemes of different ages for employees
or groups or categories of employees… does not constitute discrimination
on the grounds of age.' In addition, the UK Government has said
that it intends to make specific provision under the implementing
regulations to allow employers to justify benefits based on length
of service by reference to a range of aims, including encouraging
and rewarding loyalty and the facilitation of employment planning.
UNISON believes that, taken together, these exemptions
mean that there is nothing in the Directive that compels the SPPA
to abolish the rule of 85.
While UNISON Scotland is firmly opposed to the abolition
of the rule of 85, we are also concerned that the proposed transitional
measures to protect the right to an unreduced pension under the
rule of 85 for future service are completely inadequate. Under the
proposed regulations only those workers within 8 years of retirement
at 60 will have their future service rights protected, leaving thousands
of other workers with significantly worse than expected retirement
Proposal to increase the minimum pension age to
UNISON Scotland is also strongly opposed to the SPPA's
proposal to increase the minimum pension age from 50 to 55. We believe
that this change would lead to substantial hardship for workers
in the 50-55 age range who may in future be made redundant.
In UNISON Scotland's view, increasing the minimum
pension age in the LGPS to 55 will undermine the delivery of the
Scottish Executive's policy on public service modernisation, by
significantly reducing the flexibility that employers have to reorganise.
Local authorities and other employers covered by the scheme currently
make extensive use of the ability to retire workers over 50 early
on redundancy or efficiency grounds. Information collected by the
Audit Commission shows that in 1998/9 approximately 30% of all workers
retiring from the LGPS did so on grounds of efficiency or redundancy.
Although exact figures are not available, a substantial number of
these individuals will have been within the 50-55 age bracket.
Most employers, quite rightly, prefer to effect modernisation
changes involving potential redundancies by agreement, and staff
between 50 and 55 whose job prospects in the market are limited
will be far more likely to leave if they are offered retirement.
Were the employers in the LGPS to lose the option of retiring workers
between 50 and 55, the result would therefore be a significant reduction
in their ability to reorganise services without provoking major
industrial relations difficulties.
UNISON Scotland is also very concerned about the impact
that an increase to 55 in the minimum retirement age would have
on workers between 50 and 55 who are nonetheless made redundant.
Obviously, if the proposed change goes ahead, we would hope that
employers would seek to avoid making redundancies within this age
group, many of who may find it difficult to obtain suitable alternative
employment. However, this unfortunately cannot be taken for granted,
and if workers between 50 and 55 are made redundant they may suffer
considerable hardship, having no pension income to fall back onto
and being forced to take whatever work they can get or to rely on
One extremely important aspect of the operation of
the SPPA's proposal to raise the minimum pension age to 55 that
needs clarifying is the question of the age at which workers between
50 and 55 who are made redundant will become entitled to an unreduced
pension. The UK Government has said that it does not plan to change
the entitlement of workers who are 55 or over and who are made redundant
to an immediate unreduced pension, a decision that UNISON Scotland
welcomes. However, if a worker who is made redundant between the
ages of 50 and 55 becomes entitled at the age of 55 only to draw
a pension that is reduced, then they will see the amount of their
pension cut by as much as 45%, drastically lowering their retirement
income and increasing the chances of that they will have to rely
on means-tested benefits. Should the SPPA decide to go ahead with
the increase in the minimum retirement age to 55, UNISON Scotland
believes that it is only fair that a worker between 50 and 55 who
is made redundant should become entitled to an unreduced pension
at the age of 55, and urges the SPPA to clarify the draft regulations
to this effect. Furthermore, we are of the view that there is a
strong legal argument to suggest that the portion of their pension
relating to service prior to 1st April 2006 should be enhanced to
reflect the time elapsed between the date of their redundancy and
their 55th birthday, in accordance with the principle that all pension
rights already accrued should be protected.
Finally, UNISON Scotland wishes to voice its strong
opposition to the SPPA's proposal for the timing of the introduction
of the minimum pension age of 55 to the LGPS, which is that it should
apply to all workers in the scheme who are under 50 on 31st March
2006. This is ahead of the UK Government's original commitment to
raise the minimum pension age to 55 for all schemes by 2010 and
will make the task of adaptation more difficult for both workers
and employers alike. UNISON Scotland believes that there is no reason
why the new minimum pension age needs to come into effect at the
same time as the other proposed changes to the LGPS, and calls on
the SPPA to move the timescale for the implementation of this change
back towards 2010.
There are a number of other issues which also need
to be considered if the SPPA propose to implement their amendments
to the LGPS in Scotland. These include the impact the changes will
have on recruitment and retention of staff as well as the evidence
that provides the justification for the proposed changes.
Impact on Recruitment and Retention
The value of the current scheme as a positive aid
in recruitment and retention should not be underestimated, particularly
when providing an alternative to the private sector employer offering
a defined contribution scheme. UNISON Scotland is concerned that
restrictions on early retirement may have the result of making it
more difficult for LGPS employers to recruit and retain, on account
of the perceived decrease in the generosity of the scheme.
UNISON Scotland is concerned that not all workers
who are eligible to join occupational pension schemes do so. In
the case of the LGPS, it is estimated that 20-30% of the eligible
workforce does not join the scheme. UNISON Scotland believes that
if changes are made which reduce individuals' retirement expectations
there is a real danger that fewer workers will join the scheme,
lowering take-up and raising costs by pushing up the average age
of scheme members. In particular, we are concerned that the impact
of this would discriminate against women, with the biggest drop
in take-up being among low paid, mostly female, part-time workers.
Justification for the Proposed Amendments
UNISON Scotland is concerned that these radical changes
are being proposed to the LGPS on the basis of insufficient evidence.
UNISON Scotland believes that it is unacceptable for SPPA to propose
changes to LGPS on grounds of cost before the results of the next
actuarial valuation is known and available for public analysis.
Given that the Government and SPPA's arguments for the changes in
the draft regulations are based so heavily on assertions about the
cost of the scheme, this has potentially far-reaching implications
and must be viewed as a serious failure of evidence based policy
UNISON Scotland believes that, when considering the
ongoing cost of the LGPS, what is relevant is not employer contribution
increases as a result of past service underfunding, but whether
or not there is a rise in the long-term underlying cost of future
service in the scheme. This will depend on the cumulative effect
of the assumptions made concerning a number of different factors,
including not longevity, but also future salary increases, future
investment returns and future changes to the age profile of the
Before any view is reached on the cost of the LGPS,
UNISON Scotland calls on the SPPA to conduct a full and open investigation
into the likely change in the cost of future service in the scheme
over time, with the participation of all the relevant stakeholders
including the trade unions. The funding of pensions is a long-term
business, and it would therefore be wrong to take decisions based
on short-term increases in employer contributions as a result of
the stockmarket downturn.
Finally, UNISON Scotland believes that in considering
any changes to the LGPS, it is crucial that the SPPA views any savings
resulting from the proposed changes in the context of the overall
cost of the scheme and total Government expenditure. In particular,
we believe that if the SPPA goes ahead with its proposed changes,
this will lead to long-term increases in the cost of means-tested
benefits such as the Pensions Credit. In addition, there is a very
real risk that if workers who are stressed and may suffer from poor
health feel obliged to work on until 65 as a result of the abolition
of the rule of 85, this will lead to an increase in ill-health retirement
Impact on Scotland
Although most of the previous arguments against the
proposed amendments to the LGPS could apply to the whole of the
UK, there are some distinct factors that will result in these amendments
having a disproportionately detrimental effect in Scotland. UNISON
Scotland believes that the SPPA should examine the impact of these
proposed amendments in terms of the effects they will have on Scotland's
public sector workforce and the economy as a whole.
Although the proposed amendments centre on the LGPS
it is assumed that they will be extended to all public sector pension
schemes. However with higher public sector employment in Scotland
compared to the UK (27.9% compared to 23.6%), these amendments,
if approved, will have a stronger effect on the Scottish economy
than in the UK as a whole. Therefore this will result in a worsening
of the pension provision for almost one third of the working population
of Scotland. This will have a related impact on future pensioner
poverty, more reliance on means tested benefits and a weakening
of the purchasing power of a significant number of the population
which would have a knock on effect on the Scottish economy.
There is also a concern that Scotland has a higher
average age than the UK as a whole and this trend is set to continue
over the next few years. Therefore more of the Scottish workforce
is closer to retirement with less time to make alternative pension
arrangements to offset the losses which could be imposed by these
A related concern is that the average earnings in
Scotland are lower than the UK (£22,600 compared to £25,180). This
would indicate that Scottish members of the LGPS have a lower income
with which to fund any alternative pension provision. It would also
mean that there would be a greater reliance on a good final salary
scheme such as the LGPS.
Therefore UNISON Scotland believes that the SPPA should
take the above factors into account when deciding whether or not
to proceed with the proposed amendments to the LGPS. UNISON Scotland
believes that the factors outlined above indicate that these proposed
amendments would have a significantly stronger detrimental effect
on Scottish scheme members and, on this basis, the amendments should
For further information please contact:
Matt Smith, Scottish Secretary
14, West Campbell Street,
Glasgow G2 6RX
Tel 0845 355 0845 Fax 0141 342 2835
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