Sunday, 1 July 2012

LGPS 2014: Reasons to Reject / Frequently Unanswered Questions (FUQ)

Thanks to Marsha-Jane - who is now too busy to blog having been elected Branch Secretary of Havering Local Government Branch (belated congrats!) - for circulating their brilliant leaflet on why we should reject the LGPS final offer. I've copied the text below of their, er, 'FUQ' sheet...

LGPS 2014: Reasons to Reject

The Local Government Pension Scheme (LGPS) proposals finally became available on the 31st May. You will soon be asked to vote on whether to accept - or reject - the new scheme over the course of the summer. Set out below are details you should know before you vote.

•    Work Longer: This proposal links our retirement age to the state retirement age – the state retirement age is already due to rise to 68 by 2044, but Government proposals could mean an even quicker increase with those under 37 working until at least 70.

•    Get Less: Most people will lose out in a Career Average (CARE) in comparison to a final salary, as almost everybody earns more at the end of their working lives.
Even if you are in the same job all your life your pay will have risen through incremental progression.

This isn't taken into account in a CARE scheme.

For a CARE scheme to be comparable to our existing 1/60 Final Salary our negotiators had told us we would need a CARE scheme with an accrual rate of 1/42 what they are offering is 1/49 – clearly worth less!

The revaluation rate is also crucial, but this deal offers us a rate of only the Consumer Price Index (CPI). The Health Service offer had a revaluation rate of CPI +1.5% and Healthworkers rejected that.

•    Pay More: Hurrah, no contribution increases (for most!) from 2014. However what they give with one hand they have taken with another. UNISON negotiators have acknowledged that the reason we have no increase in contributions is because we have a worse accrual rate. This means we will get less pension.

In addition to this we will still pay more anyway because we will be paying for longer before we can retire at the state pension age

Frequently Unanswered Questions

Q: What happens if I'm off Long Term Sick?
A: Under our existing scheme your membership is not affected by sickness absence. Your benefits will continue as if you were working normally. Under LGPS 2014 proposals you would only build up what you actually earned that year (so if you go down to half pay or nil pay this may affect your pension build up.) It is not clear whether you would be credited with full pay during periods of sickness.

Q: What about young workers?
A: The younger you are the worse this offer is, you are not covered by the protections you have to pay for longer and the value of your pension will be worth less than now.

Q: This offer guarantees I can stay in LGPS if I'm privatised or transferred, how will that work?
A: UNISON negotiators have said they don't know, but the Employers are working on it.

Q: Where is the Equality Impact Assessment (EIA)?
A: The EIA is now being looked at but UNISON and the Employers have had this deal ready since February the 13th so it could have and should have been done sooner.

Q: What about the vesting period?
A: At the moment you can access your pension after paying in for 3 months (the vesting period), under LGPS 2014 you won't be able to get it until you've paid in for 2 years.

Q: Is the new offer within the Government's cost envelope, saving £900 million from the current LGPS?
A: Yes, so, how can the new scheme possibly be better for members? Accrual rate: How much of your salary transfers into your pension pot every year. Revaluation Rate: How much your pension pot is increased by every year.

CPI: Consumer Price Index – The Government's inflation index, excludes Housing Costs

State Pension Age: The age the Government says you can retire and get your full pension without deductions.

CARE: Career Average Revalued Earnings – you only build up your pension pot on what you earned that year

Final Salary: Your pension is calculated on your final salary times the amount of years you have worked.

1 comment:

  1. Of course there's no guarantee there won't be future changes if the costs of the LGPS change.
    Not sure I agree with you that in CARE vs final salary you automatically lose out because your salary is normally higher when you finish working. Surely if your pay rises then your earned benefit for that year (in a CARE scheme) would also rise? Plus the revaluation should take into account if you have been at the same level (e.g. without increment) for many years. (That is if the revaluation rate is right).

    I've done the maths and CARE42 with a rate of CPI as 2% gives you same or better pension for up to 50 years contributions (50 years is certainly possible for those just starting out). CARE43 with 2% is only just under. CARE42 +3.5% would be around 40% more generous than current LGPS at 50 years!! In fact, any CARE +3.5%, as far as CARE60 +3.5%, is more generous. CARE60 +3.5% is only just under.

    CARE49 with 2% works fine up to 30 years contributions, but 31 or more and you will get less.

    Of course, you're right about contributing longer, anyone born after 6th December 1953 I believe.

    The vesting period - I believe you will get contributions back if you've paid less than 2 years.
    Some other unanswered questions:
    Part-timers will pay less as the scheme contributions are now based on actual earnings rather than on the full-time equivalents. But would this mean their pension will also be less (because they have made less contributions)?

    Re: transfers out, the joint statement, says "where scheme members are outsourced they will be able to stay in the scheme on first and subsequent transfers (currently this is a choice for the new employer)." Will this still apply where scheme members are already employed by an "admitted body", as opposed to those currently employed by "scheduled bodies"? E.g. Universities are usually "Admitted Bodies".