WIREDGOV

Consultation has begun on a new Local Government Pension Scheme (LGPS) in Scotland.

The scheme is designed to be affordable and sustainable, as well as fairer for employers, scheme members and tax payers.

Savings from the removal of the Rule of 85 from the LGPS would be reinvested in the new scheme. The Rule of 85 was removed in December 2006 in line with the EC Directive on Equal Treatment in Employment and Occupation.

Among the key proposals in the new scheme are:

• Improved accrual rate for building pension benefits from 1/80th (plus a lump sum of three times the annual pension) to 1/60th (with no automatic lump sum). For example, members who currently pay into the scheme for 30 years would receive 30/80ths of their final pay on retirement plus lump sum. Under the proposal, members would receive 30/60ths of their final pay on retirement
• Lump sum death in service grants for partners to increase from two times final pay to three times final pay
• Increased flexibility. Members wishing to work beyond 65 could reduce hours while taking part of their pension
• Employee contribution rates to increase from six per cent to an average of 6.3 per cent, set at tiered variable levels linked to pensionable pay

The proposals have been developed by a tripartite group of officials from the Scottish Executive, Convention of Scottish Local Authorities (COSLA) and trades unions. Those wishing to respond to the consultation can access the full proposals on the Scottish Public Pensions Agency (SPPA) website

Occupational pensions is a reserved matter and therefore the responsibility of the UK Government, although Scottish Ministers have executively devolved powers to make changes to public pension schemes such as the LGPS.

The LGPS already has a normal pension age of 65 and there has been no change to this. New members to other public service pension schemes will have a normal pension age of 65 too. Other new public service pension schemes are broadly similar.

Under the Rule of 85, members aged over 60, whose age and service added up to 85, could retire early and receive an unreduced pension. The Rule had to be removed to comply with the EC Directive on equality in the workplace.

Following the consultation, final decisions will be taken on the new scheme outline and theseare likely to be announced at the end of 2007.