One in four council workers already opted out of pension scheme shows proposed contribution increases to local government pension schemes would be a disaster.
Government proposals to increase contributions by 3.2% to 9.6% will make this worse, jeopardising the entire Local Government Pension Scheme for its four million members says GMB
A new GMB study shows that the participation rate in the Local Government Pension scheme (LGPS) ranges from a low of 46% in Central Bedfordshire to 99% in Sheffield. In 46 councils one in four or more of all council workers including low earning care workers, teaching assistants, cleaners and support staff are not members of the pension fund. The study also shows that in the five years to 2011 these has been a 7% overall drop in workers participating in the LGPS. Overall 1 in 4 workers elegible to be in the scheme are opted out of the scheme concluding that they cannot afford to be in the Local Government Pension Scheme. The overall participation rates for 118 Councils in England are shown below.
GMB established that data on participation rates in the current Local Government pension scheme using the Freedom of Information Act. GMB says that this data proves that increasing the contribution rate by 3.2% from 6.4% to 9.6%, as part of the proposed £1billion Osborne Pension Tax which is the target Treasury yield from the higher employee contribution rate of 9.6%, will drive thousands more away from pension saving while doing nothing to increase the funding level of the scheme. See Note 1 and 2 below.
Percentage of eligible employees participating in the Local Government Pension Scheme according to responses received from 118 Councils by GMB to a Freedom of Information request.
|Stockton on Tees||55%|
|Isles of Scilly||61%|
|Barking & Dagenham||64%|
|City of London||65%|
|Windsor & Maidenhead||71%|
|Isle of Wight||75%|
|Cheshire West & Chester||77%|
|City of York||77%|
|North East Lincolnshire||78%|
|Hammersmith & Fulham||79%|
|Bath & NE Somerset||81%|
|North Yorks CC||81%|
Brian Strutton, GMB National Secretary for Public Services, said:
“Low paid council workers have had a two year pay freeze and are finding it increasingly hard to save for their retirement as our survey shows. Government proposals to increase contributions by 3.2% to 9.6% would make this worse, jeopardising the entire Local Government Pension Scheme for its four million members. We need sustainability and fairness that encourages people to invest in their retirement and not be reliant on welfare benefits.
The Chancellor is insisting on raising £1 billion from the LGPS in a tax that will see central government grants to local authorities cut and contribution income to the scheme plummet as members leave the scheme. In a survey of more than 2,000 scheme members 39% said they would leave the scheme if the average contribution rate increased to 9.6%.
The LGPS pays out on average £4,200 a year to LGPS pensioners, the lowest in the public sector and has an annual positive cash flow of £4 billion. Yet the Chancellor seeks to wipe this out overnight with a doomed policy that will destroy what should be a viable, sustainable means of funding retirement for millions of front line public sector workers.
Government has said that it wants people to save for retirement but is failing to ensure low paid workers stay in their pension scheme. This causes the legacy of under saving that the Turner Commission warned about five years ago, a legacy that will leave millions in poverty in later life.
As the government prepares to introduce auto-enrolment in the private sector it should be examining why 20 years of auto-enrolment to a good quality scheme still leads to a quarter of local authority employees opting out.”