Town hall pension scheme may tweak Hutton proposals

The government will allow the Local Government Pension Scheme (LGPS) to ditch Lord Hutton’s proposals for a career average scheme and keep the final salary arrangements, a source close to government said.

IFAOnline's sister title Professional Pensions was told the Treasury will let employers and trade unions vary the government’s proposed career average scheme and keep final salary benefits for members if it can justify this as fairer.

This comes despite Chancellor George Osborne saying in March 2011 there would be no “cherry picking” on Hutton’s reforms.

However, the source said LGPS representatives will have to convince the Treasury any plans to preserve final salary is within the gross cost ceiling of 17.3% and justify how it meets Hutton’s “fairness” agenda.

The source said: “Yes, career average is up for discussion but if you want it, you are going to have to justify where savings are going to be made in other areas to pay for it.

“You would have to come up with a justification why final salary should be kept to overcome the lack of fairness argument over final salary schemes.”

Detailed proposals will be agreed for the new scheme by the end of the year and be implemented in 2015.

It is understood the Treasury moved from an initial gross cost ceiling, comprising employer and employee contribution, of 18.8% down to 17.3% for the LGPS. Local government employers have been set a net cost ceiling of 9.3% contributions.