Last week pensions champions across Scotland gathered to consider the latest developments in negotiations for a new Scottish Local Government Pension Scheme (LGPS). The key outcomes are in my latest Scottish Pensions Bulletin.
We have made reasonable progress in designing the core scheme to address the changes imposed through the UK Public Service Pensions Act. This is an unwarranted and unnecessary interference in Scottish pension schemes and our task was to minimise the impact. While we can do nothing about the higher retirement age we should be able to deliver a new scheme that has a better accrual rate for the same average contributions.
We would have liked to mitigate the retirement age with other improvements to the scheme. However, in the current economic climate members are understandably focused on keeping contributions as low as possible, particularly for low paid staff who are most likely to opt out of the pension scheme. Some 25% of council workers are not in the current scheme and cost is the main reason. Most of these improvements also have a disproportionate benefit to one group or another and pension champions felt that we should focus on benefits that cover most workers in the scheme.
More work to do on the details and we hope to present a draft agreement to meetings early next month and hold a ballot of all members in October.
One aspect of the Pensions Act that we have less problem with is changes in the way the scheme is governed. These include a new Scheme Advisory Board at Scottish level to replace SLOGPAG and Pension Boards with equal member and employer representation at fund level. Initial discussions have highlighted some differences between unions and the employers on this issue. UNISON has long argued for a more radical reform of pension funds while the employers are focussed on defending the status quo. Discussions will continue and my trade union side paper is on our website.
On the issue of governance there is an excellent Radio 4 programme worth listening to, "How You Pay for the City" (hat tip to John Gray). Former fund manager David Pitt-Watson highlights excessive charges in the UK compared to Holland that means the average comparable Dutch pension will be 50% higher than you would get in the UK. The programme sets out the mechanisms fund managers use to maximise their fees at the expense of scheme members and pensioners. It is not just excessive fees by fund managers but also "churn" (excessive buying and selling of stock); stock lending (they lend out your share certificates for a fee), "Custody Banks" and "transitional management". UNISON's Colin Meech explains the implications for LGPS funds.
If anyone wonders why we think reform is long overdue, listen to this programme!