The incoming Local Government Pension Scheme (LGPS) 2014 benefit structure may be changed in the next 10 years, Barnett Waddingham partner Graeme Muir warns.
Speaking at the Eversheds Public Sector Pensions Conference, Muir said the real costing of next year's benefit reforms are likely to be "different to what we assumed".
Local Government Association (LGA) head of pensions Jeff Houston clarified a provision in recent legislation that public service pensions will remain unchanged for 25 years.
Houston said the 25-year guarantee "applies to the framework" but "doesn't apply to the scheme design". Regulations governing cost management, when published, will instead dictate whether benefits are reassessed based on comparison to costs of current benefits.
The LGPS 2014 scheme allows for accrual at 1/49th per year of service, in a career average revalued earnings (CARE) structure. Currently, the LGPS benefits provide 1/60th accrual.
Houston said: "When the cost management process is out there, that 1/49th is under threat as soon as the scheme costs start moving in the wrong direction."
Muir said a key driver of scheme costing will be the average age of scheme members.
He said: "The older you are, the more generous the 1/49th is compared to the old scheme. If auto-enrolment (AE) means we get lots of young people in, it could be a way down the road; if they don't join and we're left with an older scheme, it'll happen a lot sooner."
Cost-control mechanisms "should be built into the design from the start", instead of imposing adjustments once the scheme is operating, Muir added.
Department for Communities and Local Government (DCLG) head of the LGPS2 division Bob Holloway said the 2016 valuation will be "the acid test" for the scheme.
He said: "Part of the cost management process we're coming forward with will ensure the scheme will change when costs exceed the cost caps and cost ceilings agreed.When will we get to that stage? The acid test will be the 2016 valuation.
"All the costing done up to now, all the cost ceilings the LGA and trade unions agreed, which government accepted, was based on 2010 valuation data. It was costing a scheme design, not based on real-world data.
"There's lots of question marks; differences between costing scheme design and costing in the real world. I don't know what the outcome of 2016 will be, but I think that will be the first acid test as to whether the costing will stand the test of time."
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