UK - Treasury plans to increase public sector employee pension contributions by 3% could destroy the Local Government Pension Scheme, the London Pensions Fund Authority warned.
Chancellor George Osborne's proposals to squeeze an extra £900m ($1.4bn) out of LGPS members - through an average 3% contribution hike over the next three years - would lead to mass member opt-outs, forcing the scheme to close, the LPFA said.
Lord Hutton is currently finalising his final report for the Independent Public Service Pensions Commission - which will look at ways of achieving Treasury funding plans - but the LFPA said the Treasury's planned increase could "break LGPS before Hutton can fix it".
LPFA chief executive Mike Taylor (pictured) said: "If significant numbers opt out-then not only will the government not get its £900m but funds will face increasing deficits at a time when it can least afford them. Employers could well end up having to put more money in than they do today resulting in a net loss to the public purse."
Taylor predicted a top civil servant's pension contributions could rise from 1.5% of pay to 4.5%, and a social worker's could increase from 6.5% to 11%. He also poured scorn on Treasury estimates that scheme take up would fall by just 1%.
The LFPA - which administers a £4bn fund - predicted the increase would have a major impact on investment markets, with funds having to adopt less risky investment strategies.
Taylor said: "By virtue of being funded, the LGPS can look at the problem of raising £900m in more than one way to find a solution that can meet the cash target while maintaining membership.
"To achieve the correct balance between fairness and sustainability, there are more sensible options than merely increasing employees' contribution rates."
Options such as reducing accrual rates, increasing retirement ages or removing the final salary basis would all generate the required reduction in employer contribution rates, he added.
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