40% of social care workers could pull out of pension scheme

Up to 40% of social care workers could pull out of the local government pension scheme if chancellor George Osborne goes ahead with plans to raise employee contributions, unions have warned.

Osborne plans to introduce a three percentage point increase in contributions for all public sector pension holders by April 2012. The government wants to cut £900m from the LGPS budget but has not set out specific changes to contributions to the scheme yet.

Currently, most social care workers in local government are members of the LGPS, and pay between 5.5% and 7.5% of their salaries towards their pensions.

Unison, Unite and the GMB – the three unions on the bargaining body, the National Joint Council – have warned that up to 40% of members will leave the scheme if their contributions go up significantly.

The unions said in a paper presented to local government employers on the NJC: “The chancellor’s intention to raise £1bn from LGPS scheme members will lead to employees paying on average 9.6% for future service; a 50% increase in contributions.”

The unions also dismissed claims that local government pensions were gold-plated, adding: “The average pension in payment from the LGPS is around £4,200 a year, for women the average is £2,870.” But they insisted the LGPS, which unlike other public sector pension schemes is wholly funded by employee and employer contributions, was on safe ground, with a cashflow of between £4bn and £5bn per year.

The government plans to increase the retirement age for public sector workers to 66 by 2020 after accepting the recommendations of Lord Hutton, in his review of public sector pensions published in March. It will also scrap final salary pension schemes, replacing them with a system based on average career earnings.

A Treasury spokesperson said: “The government is committed to providing good quality public service pensions whilst ensuring long-term sustainability. This includes continuing with a form of defined benefit pension and ministers are engaging with public sector unions to deliver the increases in employee contributions recommended by former work and pensions secretary, Lord Hutton, in a progressive way. The government will put forward proposals about how savings will be delivered across schemes in June.”

Earlier this year, the chair of the Local Government Association, Baroness Eaton, warned Osborne that many workers could pull out of the scheme if plans to raise contributions went ahead.

Brian Strutton, national secretary of the GMB, has also warned the move would be “disastrous”.

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