Local government final salary pensions under threat

Plans are being drawn up to slash public sector workers’ pension plans to deal with an expected £60bn shortfall in pension funds.

Communities secretary John Denham is said to be drawing up plans to strip two million local government employees of their final salary pension schemes.

Senior staff could be set to lose out on tens of thousands of pounds a year if the changes are applied across the board, and the decision could spark industrial action.

Sources told The Times that the proposals included moving staff on to a “career-average scheme”, a system already used for new recruits to the civil service.

A source added that doctors, nurses and teachers were likely to face similar changes in the future.

Under current final salary schemes a council chief on £200,000 a year would be entitled to an annual pension of £132,000 after 40 years in the public sector. But analysts have said that under a career average scheme this could be cut by tens of thousands of pounds a year.

When actuaries examine local government pension funds next year they are expected to reveal a shortfall of at least £60bn.

Last week Personnel Today reported that Cherwell District Council had asked employees to inform them if they intended to retire in the next three years so that the council could plan for the coming “uncertain” years.