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Local Government Pension Scheme

Ministry of Housing, Communities and Local Government written question – answered on 21st January 2020.

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Photo of Lord Hutton of Furness Lord Hutton of Furness Labour

To ask Her Majesty's Government what assessment they have made of the cost savings resulting from the 2014 reforms to the Local Government Pension Scheme.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie Lord in Waiting (HM Household) (Whip), Parliamentary Under-Secretary (Housing, Communities and Local Government)

In 2014 and 2015, significant reforms were made to public service pension schemes to address increases in the costs of providing pension benefits to public workers, and to place schemes on a more sustainable and affordable long-term footing. In the Local Government Pension Scheme (LGPS), reforms were implemented from 1st April 2014 and included moving the scheme from a final salary benefit structure to a career average benefit structure.

In May 2012, the Government published documents (attached)on the planned reforms to the LGPS including a costings analysis from the Government Actuary’s Department (http://data.parliament.uk/DepositedPapers/Files/DEP2012-1614/Buildupofcostsandcostreconciliationtables-Final.pdf). This analysis outlined that the existing final salary scheme design was estimated to cost in total 21.73% of pay (p2) and the planned career average scheme was estimated to cost in total 19.51% of pay (p3), suggesting an overall saving of just over 2.2% of pay.

To ensure consistency with other public service pension schemes, the final design of the reformed LGPS was changed so that scheme members received revaluation of their in-year accrued pension immediately. This increased the costs of the career average scheme by an estimated 0.4% (see table 7.1 at (attached) http://lgpslibrary.org/assets/othergov/2013VRep.pdf

The Government is currently considering the changes to public service pension schemes which will be necessary to comply with the findings of the Courts in the McCloud and Sargeant cases (https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-07-15/HCWS1725/) and these will have cost implications for the reformed scheme.

Reform to the LGPS (PDF Document, 121.35 KB)
Local Government Pension (PDF Document, 189.11 KB)

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