1. Local Government Pension Scheme in England and Wales AN UPDATE
LGFPS Division
JUNE 2006

2. Key facts and figures 2004-05 1.76 million active members
1.0 million pensioners
0.8 million deferred members
£3.8 billion from employers contributions
£1.5 billion from employees contributions
£2.4 billion from investments
£4.2 billion expenditure on benefits
TC/DCLG/01

3. Regulation and management
Government-sponsored, funded, public service pension scheme
Role of the Secretary of State
Statutory framework within secondary legislation
Administered, invested locally, 89 separate pension funds
Number of separate employers in each fund, including local authorities, schools, FE/HE colleges, private sector contractors
TC/DCLG/02

4. Role of the Department Affordable and sustainable reform
Regulation and stewardship
Regulation and advice on prudential investment and management
Liaison with local government, trades unions, HMT, DWP, OGDs, professional bodies (CIPFA, Fund Managers) and regulators (Pension Regulator Ombudsman).
Division also responsible for Firefighters Pension Scheme
TC/DCLG/03

5. Fund valuation process
Each fund is actuarially valued every three years
Funds are required to be solvent and produce a Funding Strategy Statement
The next valuation is at 31 March 2007
The new employers rates will affect local authority budgets for
TC/DCLG/04

6. Current scheme Normal Retirement Age of 65
Final salary scheme, 1/80th accrual
3/80 automatic tax-free lump sum
Partners pensions
Survivor benefits
Ill health provisions
Compensation and redundancy benefits
TC/DCLG/05

7. Revocation 1 April 2005 removal of the 85 year rule
Retrospective revocation to that date at “no cost to taxpayers”. A key Governmental principle throughout
Tripartite Committee discussions
Consultation 5 December 2005 – 28 February 2006
J.R.
28 March industrial action
TC/DCLG/06

8. Recent amendments Regulations laid 30 March
Remove 85 year rule on 1 October 2006
Protect existing scheme members closest to retirement to 2013
Introduce flexibilities associated with the new simplified tax regime for pensions
TC/DCLG/07

9. Recent talks between TUs/LGA
30 March Statement: “calling on both sides to begin talks” and “prepared to introduce further amendments before the Summer Recess”, in force 1 October
12 April Statement: TU’s suspended planned strikes, began constructive discussions with LGA
Proposal for additional legal and affordable protections for existing members submitted
Consultation Began 20 May until 3 July
To be in force for 1 October
TC/DCLG/08

10. The new-look scheme Facing the Future Green Paper 2004
Providing for the modern workforce
Taking account of improving longevity
Proposed timetable:
Policy paper June 2006 with costed options
Draft regulations autumn 2006
Final regulations April 2007
Implementation April 2008
TC/DCLG/09

11. Principles for reform
TUs/LGA have agreed to recycle 50% of savings from removal of 85 year rule and increased commutation
Affordable, sustainable and fair to taxpayers
Good quality DB scheme that meets the challenge of a changing, flexible workforce
Equality-proofed
TC/DCLG/10

12. CHALLENGES… Balance – cost and desire
Realistic – affordable, viable, fair
Modern – flexible, equality-proofed, relevant
Accessible – improved, particularly the low paid/female
Common – goals of TU’s and Employers for a good quality DB, statutorily protected, pension scheme
TC/DCLG/11

13. What are the options…… Three options for the basic framework
-Final salary scheme
-Career-average scheme
-Hybrid scheme (Career average plus final salary)
Other issues
-Employee contributions
-Revisiting flexible retirement
-Improved access
-Co-habitees pensions
-Two-tier ill-health provisions
-Improved death in service benefits
-Encourage member saving through extra contributions
-Cost sharing
TC/DCLG/12