UK - Council staff pension contributions are set to rise for the first time since 1937 in a bid to meet mounting costs, it can be revealed.
The local government’s chief adviser on pensions is recommending the rise after new figures show escalating pension costs are partly to blame for a record 12.8% jump in council tax bills in England and Wales.
Local government pensions committee assistant director Terry Edwards has called on the government to:
- Increase contributions for new employees to 7% – up from 6%.- Raise the minimum retirement age from 50 to 55.- Fix the normal retirement age at 65.
Edwards said: “One has to face reality – people are living longer and drawing benefits for longer. The cost of that should be borne, in part, by a rise in the contribution rate.”
He pointed out that death-in-service benefits had risen and deferred and spouse benefits had been introduced since 1937.
Punter Southall principal Graham Muir agreed that contribution rates had to rise and said that while local authorities were supposed to pay 12% – double the employee contribution – several were now paying up to 20%.
He also pointed out that actuarial valuations in March 2004 would see many local authorities playing “catch up” because much of the funding increases made since 2001 had been wiped out by falling investment returns.
The 2001 funding increases have been an escalating burden on council taxpayers because of “stepped” increases in local authority contributions.
West Sussex County Pension Fund chief technical officer Tim Stretton, who collates local authority pension fund statistics, said: “Most local authorities elected to go for stepped increases and the result of those increases does form part of the increase (12.8%) in council tax.”
*The Office of the Deputy Prime Minister has already recommended that contributions for new employees at Scottish councils should rise from 6% to 7%.
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