The government has announced details of a revised pension scheme for 1.7 million local council workers.
The new scheme will apply to all existing members as well as new joiners from 1 April 2008.
From April 2008, they will have to pay higher contributions, although the rate at which their final salary pension will build up has been improved.
In March, hundreds of thousands of council employees went on strike over plans to prevent certain staff retiring early without any penalty.
Phil Woolas, local government minister, said: “Our objective has always been to provide a viable local government pension scheme in England and Wales, flexible for both existing and future members, but also affordable to employers and fair to the taxpayers who underwrite it.
“These reforms will help to stabilise costs, while honouring the government’s intention to ensure that no additional costs are imposed on taxpayers.”
The so-called ‘Rule of 85’, which lets staff retire at the age of 60 if their combined age and service totals at least 85, will continue as a transitional arrangement for existing members until 2020.
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Local government trade unions, which have been in ongoing negotiations with employers, were furious at the government’s intervention. Unison warned that if it was prevented from continuing its negotiations with the employers, it would hold another strike ballot of its members.
The new scheme
Tiered employee contributions based on salary. Employees will pay 5.5% on the first £12,000 of their pensionable pay, and 7.5% on pensionable pay above this figure. This will produce an average employee contribution rate of 6.3% across all earnings, up from the current average rate of 5.8%
A final salary scheme based on 1/60th of salary for each year of membership
Revised and targeted ill-health retirement package
The extension of survivor benefits for spouses, civil partners and children to co-habiting partners
An increase in death-in-service lump sum from two times to three times salary
A facility to make extra savings to provide a further maximum extra pension of £5,000 per year.
