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Local Government Pensions Scheme Phase 2 Amendments

January 2005


This briefing paper provides an update on the Local Government Pension Scheme (LGPS) regarding the Proposed Phase 2 Amendments from the Scottish Public Pensions Agency (SPPA).


The Scottish Public Pensions Agency (SPPA) is considering 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 (by phasing out and abolishing the 85-year rule) while increasing the minimum retirement age to 55.

Retirement Ages

Raising 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, 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.

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.

85- Year Rule

In order to encourage more workers to keep working until they are 65, the SPPA propose abolishing the 85 year rule for new members and phasing it out for existing members (see Briefing No. 77 for more details).

The abolition of the rule of 85, 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 is 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.

There are further concerns that forcing workers to stay on until they are 65 will result in more ill health and a lack of opportunities for school leavers and graduates.

Raising Minimum Retirement Age

UNISON Scotland is strongly opposed to the 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.

UNISON Scotland is 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 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 in this age group are made redundant they may suffer considerable hardship, having no pension income to fall back onto until they are 55 and being forced to take whatever work they can get or to rely on benefits.

Other Issues

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.

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.

Impact on 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.

Also with Scotland having a higher average age and lower average earnings than the UK as a whole, this will leave Scots workers with less time and a lower income in which to make alternative pension arrangements.

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 be rejected.

Action for Branches

This briefing paper is intended to update members on proposed changes to the LGPS. As mentioned earlier the SPPA are likely to introduce these changes in Scotland in 2006.

UNISON will continue to campaign to protect and enhance the LGPS.

UNISON Scotland Response to Proposed Changes


UNISON Proper Pensions Campaign



Further Information
UNISON Scotland Response to Proposed Changes

UNISON Proper Pensions Campaign

TUC Pensions information

Department of Works and Pensions:

Contacts list:

Dave Watson -

@ The P&I Team
14 West Campbell St
Glasgow G26RX
Tel 0845 355 0845
Fax 0141-307 2572