The man who runs the Local Government Pension Scheme has warned that public sector pensions need radical reform to meet critics who believe there is a growing “pensions apartheid”.
Bob Holloway, who manages the LGPS, is quoted in Public Servant magazine saying radical options must be considered. These could include:
1] increased employee contributions
2] raised retirement ages
3] public service cuts
4] council tax rises
This is radical stuff to come from a senior DCLG official (*although Holloway disputes parts of the article). His other suggestions – speaking at a conference of Whitehall types – included the idea of higher and lower membership bands. This could mean those earning £75,000-plus could have to pay higher contributions.
“The LGPS is under threat, something has to happen – things may even happen before a general election,” he said. “There will need to be something more major than a sticking plaster. Unfortunately, people are refusing to die.”
This is surely going to be one of the major battlegrounds before or after the general election. Philip Hammond has warned that it’s unsustainable for 90 per cent of public sector workers to have final salary schemes while only 5 per cent of private sector workers do. Watch this space.
Here is the government’s response:
“No changes have been proposed. There is an informal consultation going on with scheme administrators to gauge views ahead of the next year’s routine three yearly valuation. The Government will continue to make sure the LGPS remains fair, solvent, protected against risk, and affordable to the taxpayer.”
* Holloway is disputing that he said points 3 and 4. And someone else who was at the speech confirms this, telling me that Holloway’s main recommendation was the increase in employee contributions.