Chancellor George Osborne has come under fire for failing to spell out how much social care workers will have to pay into their pensions in future.
In yesterday’s Budget, Osborne reiterated his intention to increase employee contributions to public sector pensions by an average three percentage points overall. This is due to come into effect in April 2012.
But unions accused Osborne of shying away from giving details on how the increases will affect individual schemes such as the Local Government Pension Scheme (LGPS). The Local Government Association warned that the chancellor had failed to understand the risks attached to his reforms.
However, the rate of increase will vary according to individual pension schemes. Most social workers are members of the LGPS, and currently contribute between 5.5% and 7.5% of their salary.
The LGPS differs from other large public sector schemes, such as the NHS scheme, because it is funded by contributions from employers and employees, rather than general taxation. Pensions are paid out of locally controlled LGPS funds.
Osborne’s failure to provide details on how increases to employee contributions will affect the LGPS has prompted severe criticism.
Brian Strutton, national secretary of the GMB, said: “What we’re learning as we delve into the detail of Hutton’s report is quite a lot of it needs putting into the context of the individual schemes. It’s strong in principle but weak in detail.
“[The Treasury] didn’t include any numbers in the Budget, because they can’t come up with numbers that work.”
Strutton added that hiking up employee contributions to the LGPS would be “disastrous” because many local authority workers would leave the scheme.
His concerns were echoed by Baroness Margaret Eaton, chairman of the Local Government Association.
She said: “With inflation high and public sector wages frozen, such a compulsory increase will hit workers hard.
“It is likely that the LGPS opt-out rate will rise as a result.”
Eaton accused Osborne of failing to recognise the “significant differences” between the funded LGPS and unfunded schemes in other parts of the sector.
A spokesperson for the Treasury said ministers had agreed to delay a final decision on how to implement the increase in employee contributions until June. The spokesperson said: “This will enable further discussions [with the Trades Union Congress] on how to ensure the impact of these changes protect the lower paid.”
Other planned pension reforms include increasing the retirement age for public sector workers and scrapping final salary pension schemes, replacing them with a system based on average career earnings.
Union activists have responded angrily to the proposals. John Burgess, a qualified social worker and secretary of the Unison branch in Barnet, north London, described the reforms as “an attack on low-paid workers”.
He said: “Asking people to work longer, pay more and get less from their pensions is punishment social care workers and totally unfair.
“Many care workers carry out manual work and asking them to work longer means their health will suffer.”
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