UK - Members will quit the Local Government Pension Scheme rather than pay proposed contribution increases, unions warn.
Unison says the scheme’s members are “outraged” over the proposed 20% jump in member contributions and an increase in the normal retirement age from 60 to 65.
Head of pensions Glyn Jenkins said the proposals – currently under consultation and due to be introduced in April 2005 – would be “a lethal cocktail” for the scheme.
He said: “If we increase the retirement age, a lot of people will not be able to stay on until 65, and so they will feel the benefits are a lot less. If contribution rates increase, they may decide it’s time to leave the scheme and rely on the state.”
Jenkins added: “It will also kill the take-up of younger staff which will be detrimental for the scheme in the long-term.”
The proposals – which were announced in July last year – are aimed at reducing the cost of running the taxpayer-funded scheme, which revealed a £6.2bn deficit at its last valuation in 2001.
Under the plans, the age at which a member can receive a full pension will increase from 60 to 65 and the age in which benefits aside from ill-health can be paid will rise from 50 to 55.
Employee contributions will also go up from 5% to 6% while employer contributions will remain at 7%.
Jenkins said the government was taking a “knee-jerk” reaction to increased costs brought about by a decline in the stock markets.
He said: “There is all this fuss about costs but public service employees are not being paid a gold-plated standard – they receive a minimum requirement.
“Reducing member benefits and moving the goal posts is not the way forward. They are charting very dangerous waters and members will be very angry if these changes are not amended in the coming months.”
But the government rejected the criticism and believed it needed to take the lead if workers in the private sector were to accept similar changes to help reduce scheme deficits.
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