Trade body Pensions UK and multiple unions have hit back at Reform UK’s plans to scrap the defined benefit (DB) structure of the Local Government Pension Scheme (LGPS).
Richard Tice, the party’s deputy leader, said this week that Reform UK planned to scrap DB pensions for new LGPS workers and instead switch them to defined contribution (DC) arrangements.
He also said the party intended to merge all LGPS funds into one single entity to be invested as a “British sovereign wealth fund”.
The Financial Times reported Tice as saying that the merged fund would have “a strategic British growth mandate”, calling the plan “an absolute game-changer”.
Tice has previously claimed that investment fees currently being charged to LGPS funds are “frankly egregious”, arguing that local authorities were paying at least £1bn more than they should in fees to fund managers, while “inadequate performance” was costing between £8bn and £10bn annually over the past five years.
However, Pensions UK has argued that the picture painted of the LGPS by Reform UK is “not supported by evidence”.
Local Government Pension Scheme – key data
- The average pension paid to LGPS pensioners is £5,016 a year, according to the Government Actuary’s Department (GAD).
- 72% of LGPS members are women, GAD’s data shows.
- 47% of pensioners receive less than £2,500 a year from the system, as per GAD.
- Pooling has saved £870m in costs, according to official figures from the Ministry of Housing, Communities and Local Government.
- Approximately 17% of LGPS assets are invested in the UK, according to Pensions UK.
‘An exemplar of UK investment’
Zoe Alexander, executive director of policy and advocacy at Pensions UK, said the LGPS was “an exemplar of UK investment” and had already saved an estimated £1bn through asset pooling. The system’s investment performance had also been strong, having returned approximately 7% a year over the past 10 years, she said.
“The LGPS exists solely to fund the retirements of local government workers… It does not exist to manage a pool of assets to fund government projects.”
Zoe Alexander, Pensions UK
“Reform’s proposals are lacking in detail, but its intentions to place all new staff into a defined contribution scheme and to transform the scheme into a sovereign wealth fund are concerning,” Alexander said.
“The LGPS exists solely to fund the retirements of close to seven million local government workers, many of whom are low earners. It does not exist to manage a pool of assets to fund government projects…
“Any policy proposing changes to the structure or approach of one of the largest pension funds in the world should be supported by evidence and detailed plans.”
She said Pensions UK was “ready to engage” with Reform “to ensure they have a full picture of the operation and strategic direction of the LGPS”.
Reform proposals ‘a terrible deal’, unions say
As well as overhauling the LGPS, Tice said Reform UK planned to scrap the Employment Rights Act, which received Royal Assent in December. Among its changes are increased access to paid parental leave and sick pay, measures to address the gender pay gap, and measures to address workplace harassment.
Together with the pension changes, unions have criticised Reform UK’s plans and accused the party of being “out of touch”.
“Reform’s offer to working people is now clear: insecurity at work and poverty when you retire.”
Mike Clancy, Prospect
Mike Clancy, general secretary of the Prospect union, said: “Reform’s proposals for public sector pensions are a terrible deal for both workers and the taxpayer.
“Reform are still refusing to admit that these pension changes will add billions to public spending in the medium term, money that would need to be found from cuts or tax rises.
“Their plans to attack employment rights are completely out of touch with what voters want, and would plunge millions back into precarious work.
“Reform’s offer to working people is now clear: insecurity at work and poverty when you retire.”
Andrea Egan, Unison’s general secretary, added that the party’s leaders “don’t think those putting in a hard day’s graft deserve basic rights or fair pay”.
“Attacking the pensions of council staff is a disastrous move,” Egan said. “Employees would be denied a secure retirement income, and it would worsen the recruitment crisis in local government.
“Whether it’s targeting low-paid staff or demonising anyone from overseas, Reform has little interest in helping workers or strengthening public services.”
