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Dave Watson

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Protect our Pensions LGPS Update Dave Watson Scottish Organiser Don t Panic! Nothing happened yet (except CPI/RPI) LGPS value for money you pay (average) 6.4% of ... – PowerPoint PPT presentation

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Title: Dave Watson


1
Protect our Pensions LGPS Update
  • Dave Watson
  • Scottish Organiser

2
Dont 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

3
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

4
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

5
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

6
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 1/55th to maintain value. UK Govt 1/65th to
    1/100th

7
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 2034-2036 and 68
    between 2044-2046
  • 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!

8
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

9
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

10
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 137-143m. LGPS 140m
  • LGPS not scored against Barnett

11
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 None None
18,000 a year 0.6 1.5 216 a year
30,000 a year 1.4 3.4 816 a year
12
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.

13
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

14
Where can you find everything?
  • Scottish Pension Web Pages
  • http//www.unison-scotland.org.uk/pensions/index.h
    tml
  • UK Campaign Web Pages
  • http//www.unison.org.uk/pensions/protectour.asp
  • Advice on Pensions
  • http//www.unison.org.uk/pensions/index.asp
  • There is a Better way
  • http//www.thereisabetterway.org/
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