Deal struck over local government pension scheme

Local government employers and trade unions have reached a deal to overhaul the Local Government Pension Scheme (LGPS), including plans to ditch payments linked to final salary.

Employer and staff bodies today announced an effective settlement designed to ensure council staff retain a generous pension while the retirement plan remains sustainable over the long-term.

The main new provisions of the proposed scheme, which if approved through consultations would be up and running from 2014, are:

· A career average revalued earnings (CARE) scheme using CPI as the revaluation factor – a move that brings to an end to pensions linked to an employee's final salary.

• A new accrual rate of 1/49th. The current rate is 1/60th.
• The scheme's 'normal pension age' to be linked to the state pension age.
• Average member contributions to remain at 6.5% of salary, but with the rate determined by 'actual' pay (and not a nuanced calculation for part-time staff).
• Lower member contributions for the lowest paid staff and higher contributions for higher-paid personnel.
• An option for current members considering opting out of the LGPS to instead pay half of their contributions in return for half of the pension, while still retaining the full value of other benefits – known as the '50/50' model.
• Benefits for past service prior to 1 April to remain protected at final salary valuations, including the highly-valued 'rule of 85' protection.
• Current scheme members to be allowed to stay in the LGPS when they are transferred to external suppliers 'on first and subsequent transfers'.

The reforms represent a significant overhaul for an invested pension scheme that is highly-valued by staff, but which has cost taxpayers – through employers' contributions - more in recent years, as members have lived longer beyond retirement.

Heather Wakefield, head of local government at Unison, said: 'The negotiations over LGPS 2014 have been long and tough and have taken place in a demanding political and economic climate. The process has shown that Unison, the LGA and the other local government unions can work productively together in the best interests of LGPS members and potential members.

'[The new agreement] is a sustainable, defined benefit scheme, which is designed to protect existing members and be affordable for the low paid and part-time workers who are its majority. Under exacting circumstances, we have achieved the best possible outcome.'

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