Local government backs higher pension contributions

The majority (75%) of local government pension experts believe there is a strong case for increasing contributions from council staff, according to the National Association of Pension Funds (NAPF).

The NAPF’s Local Authority Pensions Poll found 83% of respondents also agreed that Lord Hutton’s proposals in his review of public sector pensions are ‘reasonable and balanced’.

The survey findings were presented to Lord Hutton on Friday 12 November, when he spoke at an NAPF local authority seminar about his review.

Respondents, half of whom are employed by local authorities, and half of whom are advisers to councils, were split over some of the cost-saving options that Lord Hutton is considering.

Asked whether they agreed with the idea of uniting the UK’s 99 council schemes to create a smaller number of regional ‘superfunds’ for England, and single funds for Scotland and Wales, 37% agreed while 43% disagreed.

Some argued that regional superfunds could secure significant economies of scale, while others said there would be many costly and practical barriers to consolidating different funds.

However, respondents were more supportive of coordinating investment work to save costs, as 65% agreed local authorities should work together to buy and share fund management services.

Joanne Segars, NAPF chief executive, said: “Those who work within local government pensions see the need for change, and think that Lord Hutton is making a reasonable case. The challenge will be finding a solution that commands the support of employers, staff and those running the pension schemes.

“There is a strong argument for increasing staff contributions, but lower earners must not be forced out by higher rates. Everyone deserves a good workplace pension.

“Local government pensions are very different to the rest of the public sector and will need a tailored approach to reform.

“There is clearly scope for councils to save money by working together to share pension costs, but there is a big debate about whether funds can be united to create regional schemes. Many say that full integration could be very complex and expensive to introduce.

“We look forward to Lord Hutton sparking further discussion about the future of local government pensions in his full report, which is due early next year.”

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