UNISON CAMBS Pensions Action 6

If you have not yet voted YES to Industrial Action on the 30th November, just read again (below) about where the increased contributions will be going. The closing date for the ballot is midday on the 3rd November. Use your vote and put a stop to this attack on Local Government Pensions.

Will the 3% hike in pension contributions improve my pension or make my pension scheme stronger?

No.

The wider scheme changes which are due to kick in in 2015 are about reforming the schemes themselves (and making further savings for the Treasury). However, the average 3.2% rise in contributions that most people will be paying is a separate initiative announced in the Spending Review by the chancellor, George Osborne and is being implemented by the relevant government ministers.

The chancellor announced that he will be implementing progressive changes to employee contributions to make further savings of £900 million from the Local Government Pension Scheme and £1.8 billion a year from the other public service schemes, including the NHS scheme) by 2014/15 – equivalent to 3% for every contributing member (3.2% on average once those below £15,000 are removed as seems likely). This is on top of the recommendations in the “Hutton Report” which suggested ways to reform the scheme.

Most of the schemes are what are known as “unfunded schemes” in which contributions go to the Treasury directly and benefits are paid as and when they are needed rather than invested in a pension fund. The Local Government Pension Scheme is different. It is a funded scheme in which contributions from both employers and employees are invested in a managed fund. Investment returns are put back into the fund or reinvested.

For the LGPS, ministers have made it very clear that the savings made by the 3% increase in contributions (3.2% on average once those below £15,000 are removed as seems likely) should be spent in mitigating the effects of decreased central funding for services.

So where the larger scale reforms suggested by Lord Hutton are at least in principle intended to strengthen the schemes AND make savings the short term savings are just about getting money directly or indirectly to central government. In effect this means that the separate announcement of a further 3% in contributions is simply going to directly or indirectly to the treasury and not to improving your pension scheme!