Dave Watson

Scottish Organiser

Protect our Pensions

LGPS Update

Don’t Panic!

• Nothing happened yet (except CPI/RPI)• LGPS value for money

•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 •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•Retirement age increases•Benefit changes to career average •Fair Deal/2TW – TUPE transfers and pensions

UK measures•Change to the way pension increases are

calculated – RPI/CPI•Scheme contribution increases•State pension & National Insurance

A New State Pension

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.

One flat rate State Pension of around £140 per week.

Members after the change is introduced would pay around 1.4% additional NI contributions and the employer would pay another 3.4%.

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•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

•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•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

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

Earnings % increase at April 2012

% increase byApril 2015

Increase in contributions by April 2015 after tax relief

Up to £15000 a year

None None None

£18,000 a year 0.6 1.5 £216 a year

£30,000 a year 1.4 3.4 £816 a year

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•NI increase for councils, pension fund cost, welfare benefits

Not necessary in Scotland – No Barnett consequence

2008 LGPS deal – cost sharing is way ahead •Pensions costs reducing as share of GDP.

Next Steps

• UK negotiations – crunch point• Scottish Govt – pensions tax options

•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

•Organisation – Champions & Contacts•Communication – internal & external

• Industrial action if necessary

Where can you find everything?

Scottish Pension Web Pageshttp://www.unison-scotland.org.uk/pensions/index.html

UK Campaign Web Pageshttp://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/