Public sector pensions

The future of public sector pensions is high on the political and media agenda. And with 75 of the 99 funds that make up the Local Government Pension Scheme in membership, the NAPF’s mixed membership of both private and public sector funds gives us a unique insight to the debate.

The Coalition Government asked former Secretary of State for Pensions Lord Hutton to chair an independent Public Service Pensions Commission to look at reforms all Government pension schemes. Lord Hutton’s report made 27 recommendations, including changing the benefits to be based on career average earnings rather than final salary and raising the normal retirement age. The Government has welcomed the report and is using it as the basis of negotiation with the trade unions over reform.

The NAPF made several evidence submissions to the Hutton Commission and has welcomed the recommendations for sustaining the LGPS as a defined benefit scheme, whilst managing costs. In December 2011, HM Treasury, Local Government Employers (LGE) and the trade unions reached an agreement for reform of the LGPS. A new LGPS scheme is planned for 2014 and work has now begun on designing the new scheme.

All issues affecting the LGPS, including the Hutton reforms, are discussed by our Local Authority members at our Local Authority Forum in November and our industry-leading Local Authority Conference each May.

For more information and to contribute to the NAPF’s policy development, please contact richard.wilson@napf.co.uk

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Key facts

Public sector pensions are often talked about as if they are one homogonous group. In fact, there is a huge variety of different schemes, with different rules, benefits and costs. The four largest pension schemes are the Local Government Pensions Scheme (LGPS), the NHS Pension Scheme, the Teachers Pensions Scheme and the Civil Service Pension Scheme.

The LGPS is the largest of all the public sector pension schemes, with 1.7 million members making contributions in England in 2010, and 1.2 million more members who aren’t currently contributing. Although the scheme benefits and regulations are set centrally, the LGPS is administered by 99 differing authorities who manage and fund the scheme at a local level. The scheme is final salary with employee contributions of between 5.5% and 7.5% of salary. Each year a members contributes he or she accrues a pension worth 1/60th of their final salary.

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