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ITEM EX24 - ANNEX 2

EXECUTIVE - 15 MARCH 2005

‘FACING THE FUTURE’: CONSULTATION ON PROPOSED CHANGES TO THE LOCAL GOVERNMENT PENSION SCHEME

Facing the future - Principles and propositions for an affordable and sustainable Local Government Pension Scheme in England and Wales

Analysis of the Central Issues and Proposed Response

from Oxfordshire County Council as Employing Authority

General Points:

  1. The Council strongly believes that developments to proposed changes to public service pension schemes should be considered in the wider picture of all public service schemes so that as much equity is secured as possible across the public sector as a whole including health and civil service. This is in-keeping with principles of fair treatment and will facilitate partnership and shared working arrangements and should avoid pensions being used by different public sector employers to compete for the same workers.

  2. The Council strongly encourages the ODPM to set up adequate communications and consultation machinery with relevant trade unions to seek to avoid the potentially highly damaging industrial action currently being considered.

    3. Specific Points:

  3. The proposed adherence to an affordable final salary scheme would be beneficial in respect of recruiting and retaining good quality staff in an area with low unemployment and where there are many competing employment opportunities available to staff. The Council believes that greater publicity should be given in recruitment information to the significant benefit this represents to employees. However, the costs of adhering to the final salary scheme both to the authority and the Council Tax payer are a cause for concern and the Council believes that consideration must now be given to other alternatives such as an average salary scheme.

  4. The Council urges careful consideration of the potential effects of the transitional arrangements for changes to avoid the possibility of employees leaving to secure preserved benefits rather than continuing in employment in a state of uncertainty about the future.

  5. The Council supports the proposal to continue with the current scheme membership rules.

  6. The Council agrees that those employees with on-going contractual relationships with the Council, including temporary workers and those on fixed term contracts, should be eligible to join the scheme. However, it is administratively simpler if those with short-term relationships under 3 months’ duration are automatic brought into membership. Casual workers who have no on-going employment relationship should not be eligible to join the scheme.

  7. The Council supports the proposed increase in the employees’ contribution according to earnings so that higher paid staff pay more than lower paid. However, the Council strongly recommends that this be kept as transparent and simple to administer as possible.

  8. The Council welcomes the confirmation of the normal retirement age as 65 years and any moves which facilitate employment beyond 65 years where this is desired, but firmly believes that employees should be able to access their pension on actuarially reduced rates from age 60.

  9. The Council is of the view that premia payments should be consolidated wherever possible into basic pay to facilitate this, however where it is not possible to consolidate such as where premia rates are payable for shift work or unsocial hours these should continue to be included in the pension calculation. Not to do so would seriously disbenefit many lower paid workers for whom this is an important element of their pay. In general other overtime, fees or bonuses should not be pensionable.

  10. The Council supports the proposals to allow the conversion of the lump sum payment.

  11. The Council does not see the benefits of removing the AVC arrangements in favour of top up arrangements in a Defined Contribution Scheme. The availability of AVC facilities may be an important incentive to join the Scheme for employees who otherwise have low pension expectations, such as if they transfer to LG employment later in their careers, but who may seek to improve these by saving at a greater level. It is, therefore, important that some suitable arrangement is available.

  12. The Council supports the proposed improvements in the death in service and survivor provision. This will give reassurance to many while not creating significant additional costs.

  13. The Council supports the proposal to pay enhanced pension only to those who are permanently incapable of working through ill health. However, a discretionary provision which allowed an employee to access his/her pension in cases of termination of employment due to long-term inefficiency resulting from ill health would be helpful.

  14. The Council supports the raising of the minimum age for premature benefits to 55 years.

  15. The Council supports early payment of pension on redundancy grounds only where there is a right to a redundancy payment. This will help to avoid employees deliberately re-entering LG employment on temporary contracts with a view to accessing their pensions at the end of the contract. However, some employees may be disadvantaged if they return to LG service in good faith, perhaps with many years of previous service, but then find themselves shortly unexpectedly redundant and with no right to payment of a pension.

  16. The Council notes that the Government Actuary has costed the latest proposals at 21% of pensionable pay. This compares to figures of 20% as calculated by the Actuary as part of the 2004 Valuation, 18% at the 2001 Valuation, 16% in 1998, 15.5% in 1995 and 14% in 1992.

  17. The Council does not support the proposal for a defined top-up scheme. See paragraph 11 above.

  18. The provisions relating to internal transfers and multiple employments should be as simple to administer and transparent as possible.

  19. The Council believes the proposals relating to children of deceased scheme members should apply to age 18 only.

  20. The point relating to surviving partners where there is a big age difference seems needlessly detailed for a rare situation.

  21. Many employees will find it difficult to maintain levels of energy and adaptability in their jobs as they approach the end of their working lives. In order to retain these workers in the workforce for as long as possible the provision of flexible retirement will be essential. The Council strongly supports imaginative options which allow employees to step down in grade or hours etc. in order to stay in employment to age 65 or beyond where desired. The employer should be given discretion over the granting of these facilities.

  22. The Council takes the view that married partners or those who have a registered civil partnership (when this becomes law) should be eligible for survivor benefits in line with the arrangements for widow(er)s. These benefits should not be extended to co-habiting partners due to the many difficulties surrounding proving entitlement.

  23. Discretionary flexibility in compensation awards is welcomed and should be extended to cases of redundancy, for the avoidance of compulsory redundancy and in cases of compromise agreement.

  24. The Council welcomes the flexibility open to the LGPS resulting from the taxation changes proposed by the Inland Revenue. In particular the Council would support the opportunity for flexible retirement options, and the option of taking 25% of pension as a tax free lump sum. The Council does not believe total membership of the scheme should be restricted in terms of service or scheme benefits, and welcomes the removal of the 15% of pay limit on pension contributions.

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