Pension contributions set to increase by 50%

Pension contributions will rise by 50% from April 2012 under plans set out by George Osborne in last year's Comprehensive Spending Review.

“Progressive” increases in employee contributions will see contribution payments to the Local Government Pension Scheme (LGPS) rise by an average of 3.2% over three years from their current level (between 5.5% and 7.5% of salary).

The Government is predicting that only 1% of current LGPS members will opt out of the scheme as a result of the increases. However, the Conservative chair of the LGA has written a letter to the chancellor warning there is strong evidence that large numbers of members will opt out of the LGPS. A recent poll by the GMB union found that 39% of its members in the LGPS would opt out if the increases were imposed next April.

This could mean that Government attempts to make public sector pensions more affordable would backfire, with disastrous economic consequences. The sustainability and viability of the scheme would be at risk, with the possibility that the LGPS could be bankrupted. This would be disastrous considering that the scheme has over £130 billion of assets invested, mainly in the UK.

UNISON is making the case that as a funded scheme the LGPS needs to be treated differently. Unlike other public sector schemes, the LGPS has sufficient assets to pay benefits for more than 20 years, without any additional contributions being made. In addition, the LGPS receives £4-5 billion more in income than it spends in benefits every year, ensuring its enduring viability.

UNISON argues that a one size fits all approach to public sector pensions is ludicrous and will be launching a national campaign against the changes.