OFFICE OF THE DEPUTY PRIME MINISTER

Local Government Pension Scheme

The Minister for Local Government (Phil Woolas): My Statement to the House on 2 December 2005 set out the process by which the Government proposed to amend the Local Government Pension Scheme in England and Wales, subject to the outcome of the statutory consultation exercise which began on 5 December 2005 and which ended on 28 February 2006. A summary of the responses received will be placed on the ODPM/LGPS website.

The Local Government Pensions Scheme is a guaranteed, final salary pension scheme open primarily to employees of local government but also to those who work in other organisations associated with local government, including, Higher and Further Education institutions. It is also a funded scheme, with its pensions funds being managed and invested locally within the framework of regulations provided by Government. In deciding on the regulations needed to ensure that all members’ pensions are safe, and prudently funded, the Government has to take account of the advice of actuaries, as well as the views of representatives of employers and members, and other interested parties.

My 2 December Statement made clear the Government’s intention to secure the Scheme’s continued affordability and viability, without placing an unfair burden on taxpayers. The Government remains committed to that objective, and also to providing an equality-proofed Scheme which is flexible and attractive in its provisions to employees and employers, both now and in the future.

To fulfil the Government’s objective for the Scheme, considerable efforts have been made to reform and to plan its future, within the framework provided by the Tripartite Committee. The Government, with the cooperation of the local authority employers and trades unions, wants to see the provision of good quality pensions for all local authority workers. The Tripartite Committee provides the right framework for key interests to seek agreement, through analysis and transparent discussions, on the way ahead for the Scheme and for any new benefit structure. However, in regulating the Scheme, the Government is required by the Scheme’s governing regulations to secure its on-going solvency and compliance with the law.

It is intended to place before Parliament the necessary amending regulations to implement what was outlined in my 2 December Statement. These will introduce significant and well supported flexibilities into the Scheme’s legal framework to reflect the simplified tax regime provided by the Finance Act 2004. It is the Government’s wish also to strike a fair and proportionate balance between the extent and the cost of any affordable and legal safeguards for existing Scheme members. To ensure compliance with European Union age discrimination legislation, set out in Council Directive 2000/78/EC, and to secure ongoing cost stability, the rule of 85 will be removed from the Scheme with effect from 1 October 2006. We remain firmly committed to ensuring the protection of those members born before 31 March 1953 who would have satisfied the rule by their 60th birthday.

Such an approach, within the current Scheme’s framework, is seen as being both affordable and legal, and it maintains the consistent stance taken by the Government that no additional costs associated with these regulations should fall on taxpayers.

Looking ahead, the Government is committed to reforming the Scheme to ensure it meets the challenge of a changing workforce both within and around local government in England and Wales. Discussions with Scheme interests are proceeding to support the preparation of a policy discussion paper on a new-look Scheme for consultation later in the year. Any reforms of the Scheme must recognise, of course, that it already has a normal retirement age of 65, that it is funded and financed in a specific way and, crucially, that any new arrangements must continue to be both affordable and legal.

A key element of these discussions, which have already begun within the framework provided by the Tripartite Committee, will be to address positively the concerns expressed about the position of existing Scheme members who contrast their particular circumstances with the agreement reached in October 2005 by other, but unfunded, public service pension schemes. The Government intends that these reforms can be guided by the principle that up to half of the savings achieved by the final removal of the rule of 85 can be re-cycled into the development of whatever benefit package is felt by the Stakeholders and membership to be appropriate for the new-look 2008 Scheme.

Going forward, the Government, given its regulatory responsibilities for the solvency and viability of the Scheme, remains firmly committed to the provision of affordable and sustainable, good quality pension arrangements in the Local Government Pension Scheme, as indeed it believes so too are all the interested parties connected with its present and future.