Audit Commission report: Local government pension scheme needs reform

The Local Government Pension Scheme (LGPS) needs reform, says a newly published report from the Audit Commission.

The report, Local government pensions in England, states that the cost of providing council pensions is rising in absolute terms and as a proportion of the total pay bill.

Looking at whether LGPS benefits are affordable in the long run, it acknowledges that recent reforms will address some of the underlying issues, but warns that these reforms alone will not guarantee long-term sustainability.

The report offers several suggestions for getting the LGPS on track, including: employee contributions could be raised but tapered to discourage members on lower salaries from opting out; local pension funds could be allowed more discretion to adjust the level of benefits offered to pension fund members; and local government employers should keep liabilities in check by controlling wage costs.

Eugene Sullivan, chief executive of the Audit Commission, said: “Media reports about generous public sector pensions distort the picture.

“We did this research to ensure that the debate was informed by facts, not perception. One of the key facts is the high proportion of part-time and low-paid members in the LGPS. Around half of pensions in payment are below £3,000 a year.

“Nevertheless, local government employers already pay much more into the LGPS than employee members, and without corrective action the gap will widen. The scheme can’t continue as it is. Unfunded liabilities are being deferred, and this is storing up problems for the future.”

The local government pension scheme in England is the largest public sector pension scheme by membership. It has 1.7 million active members, 1.15 million members with deferred pensions, and 1.1 million receiving pensions. It is made up of 79 separate pension funds across England.

Read more articles on public sector pension schemes