The Treasury has sought to reassure employers and staff that the unique nature of the Local Government Pension Scheme will be taken into account during any reform of the wider pensions system.
It follows growing concern from employers and unions that a proposed increase in employee contributions to public sector pensions would prompt many employees to opt out of the local government scheme.
Baroness Margaret Eaton, outgoing chair of the Local Government Association, went as far as warning that the reforms could trigger stock market chaos.
Speaking to The Guardian newspaper today, she pointed out that the funded local government scheme generates “a hell of a lot of money for the economy”.
She said: “If there aren’t enough people paying in, there wouldn’t be enough for people to take out the other end. It would be a major catastrophe for government. The scheme would collapse.”
But a spokesperson for the Treasury said: “We recognise the different funding of the LGPS and, as the chief secretary [Danny Alexander] has made clear, we are considering this as part of ongoing discussions with the unions.”
Unions and ministers are due to meet on Monday to continue negotiations over the controversial reforms, which include increasing employee contributions to pensions by 3.2 percentage points on average.
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