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 1/55 th to maintain value. UK Govt 1/65 th 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 and 68 between  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 £ m. LGPS £140m LGPS not scored against Barnett

Illustrative Contribution Increases Earnings% increase at April 2012 % increase by April 2015 Increase in contributions by April 2015 after tax relief Up to £15000 a year None £18,000 a year0.61.5£216 a year £30,000 a year1.43.4£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 Pages UK Campaign Web Pages Advice on Pensions There is a Better way