Local Government pension experts back higher contributions, but split over ‘superfunds’

Three out of four local government pension experts believe there is a strong case for increasing contributions from council staff into their pensions, a new survey showed today.

The National Association of Pension Funds (NAPF) will present its survey findings to Lord Hutton, who is speaking at an NAPF local authority seminar today (Fri) about his review of public sector pensions.

Asked if Lord Hutton was right to say there is a strong case for higher employee contributions, 75% agreed - 40% of them ‘very strongly’ - while only 12% disagreed. The NAPF has already warned that any increases must protect the low paid.

The vast majority of respondents (83%) also agreed that Lord Hutton’s proposals so far are ‘reasonable and balanced’.

But opinions from the respondents – half of whom are employed by local authorities, half of whom are advisers to councils – were more keenly split over some of the cost-saving options which Lord Hutton is considering.

Respondents were clearly divided on the idea of uniting the UK’s 99 council schemes to create a smaller number of regional ‘superfunds’ for England, and single funds for Scotland and Wales. 37% agreed with the idea, while 43% disagreed.

Some argue that regional superfunds could secure significant economies of scale. Others say there would be many costly and practical barriers to consolidating different funds.

However, respondents were more supportive of the idea of coordinating investment work to save costs. Two thirds (65%) agreed that local authorities should work together to buy and share fund management services. Currently most local council pension funds approach fund managers individually, although some councils have started working jointly.

The survey findings are not indicative of NAPF views or policy, but are to gauge opinion and prompt discussion at today’s event with Lord Hutton.

Joanne Segars, NAPF Chief Executive, said:

“Those who work within local government pensions see the need for change, and think that Lord Hutton is making a reasonable case. The challenge will be finding a solution that commands the support of employers, staff and those running the pension schemes.

“There is a strong argument for increasing staff contributions, but lower earners must not be forced out by higher rates. Everyone deserves a good workplace pension.

“Local government pensions are very different to the rest of the public sector and will need a tailored approach to reform.

“There is clearly scope for councils to save money by working together to share pension costs, but there is a big debate about whether funds can be united to create regional schemes. Many say that full integration could be very complex and expensive to introduce.

“We look forward to Lord Hutton sparking further discussion about the future of local government pensions in his full report, which is due early next year.”

The NAPF will be submitting its views on public sector pensions, including local government schemes, to Lord Hutton’s commission towards the end of December.

 

Notes to Editors:

1. The survey drew on members of the NAPF’s Local Authority PensionsConnection forum and was run between 4 and 9 November 2010. It attracted 149 responses, 72 of which were from those employed by local authorities. The other responses were mostly from pensions consultants and advisers working with local authority pensions. Whether the respondent was employed by a local authority or not was not reflected by any ‘groupthink’ polarisation in the answers to any of the questions.

2. The survey results are attached.

3. Lord Hutton is expected to speak to a private meeting of the NAPF’s Local Authority Forum on the afternoon of 12 November 2010. Journalists are not able to attend.

4. The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,200 pension schemes with some 15 million members and assets of around £800 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.

 

Contact:

Paul Platt, Head of Media and PR, NAPF, 020 7601 1717 or 07917 506 683, [email protected]

Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]

Download the survey