Meeting documents

Pension Fund Committee
Friday, 21 November 2003

PF211103-24

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ITEM PF24

PENSION FUND COMMITTEE – 21 NOVEMBER 2003

INTRODUCTION TO PROPOSED CHANGES TO THE LOCAL GOVERNMENT PENSION SCHEME

Report by the Head of Finance

Introduction

  1. The Office of the Deputy Prime Minister (ODPM) has been undertaking a stocktake of the Local Government Pension Scheme (LGPS) with the intention of simplifying the rules and reducing costs. The ODPM has drafted amended regulations, to be introduced mainly from 1 April 2004, and has asked for comments on these by 1 December 2003. The amended regulations represent the first stage of the changes to be made to the scheme.

    2. Ist Stage amendments

  2. The attached Annex 1 (download as .rtf file) highlights the main changes to the regulations by showing:

    • the current practice;

    • the proposed change; and

    • officer comments about the proposal.

  1. The Society of County Treasurers has already replied to the ODPM and the Annex reflects some of their comments. The full response will be available to the Committee as background information.

  2. The Committee are reminded that it is commenting on the draft regulations in its capacity as representing the Council as an employer, as well as in its capacity as administering authority for the Pension Fund.

    3. 2nd Stage Amendments

  3. The second stage of the process is likely to be much more controversial than the first as it will have more significant and fundamental impact. As a prelude to the second stage, the ODPM has issued a discussion paper drawing on the responses received from earlier stocktake consultation. The discussion paper, which was received only a short time ago, is attached at Annex 2 (download as .rtf file), for information, together with a covering letter from the ODPM. It covers, among other things, issues such as:

    • phasing out of 85 year rule;

    • increasing earliest age for receiving benefits from 50 to 55;

    • flexible retirement & incentivising members to remain in employment;

    • options to increase employee contributions, and;

    • other issues such as partner benefits and amendments to the redundancy provisions of the Scheme.

  1. The ODPM has indicated that comments on this paper will be carefully considered by Ministers and will be translated into draft amending regulations for statutory consultation in early 2004 to take effect from 1 April 2005. The ODPM has asked for a response by 12 January 2004. However there is no further meeting of this Committee before this response date. The Committee will need to consider what, if any, response should be made. For example, it may be appropriate to refer this to the political groups or the Executive.

    2. Financial Implications

  2. The intention of the ODPM stocktake is to provide a simplified yet cost effective scheme, sustainable for all stakeholders; employers, scheme members and tax payers. The first stage draft proposals will involve considerable additional administration at this stage with additional changes to come in stage two. The response to the ODPM could suggest that rather than two stages the amendments are combined, which could help reduce costs.

  3. Some of the proposals in the stage two discussion paper will, in the long-term, increase the employee’s share of the cost of providing LGPS benefits. As they are intended to be implemented from 1 April 2005 and will be known well in advance of this date it may be possible for scheme actuaries to take this into account when setting the employer contribution rates in the 2004 triennial valuation.

  4. The stage two policy discussion paper points out that the two stages are preparation for the long term decisions which are yet to be made about local government pensions which will have implications for future costs of providing such benefits.

    5. Environmental Implications

  5. There are no environmental implications.

    6. Staff Implications

  6. The Annex points out areas where the proposals will involve significant administration, but until the regulations are made it is difficult to assess exactly the appropriate strategy to carry them out and the effects on staffing.

    7. RECOMMENDATIONS

    The Committee is RECOMMENDED to:

          1. note the report and endorse the officers’ comments on the draft regulations as contained in Annex 1;

          2. consider whether a further response from the Council as an employer is necessary; and

          3. consider how it wishes to respond to the second stage discussion paper (Annex 2).

CHRIS GRAY
Head of Finance

Background papers:
Draft Regulations
Society of County Treasurers Response
ODPM Discussion papers

Contact Officer: Jenny Wylie, Pension Services Tel: (01865) 815530

November 2003

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