The Local Government Pension Scheme is the UK’s largest public sector pension scheme by membership. In our latest information paper, we examine its long-term affordability, and find that although it is backed by local funds, recently investments have failed to deliver the anticipated returns, and the funds currently cover only about three-quarters of the scheme’s future liabilities.
The paper, which is available to download in full from this page, is intended to inform Lord Hutton's inquiry into public sector pensions. In it, we suggest some actions that could be taken to put the Local Government Pension Scheme on a better financial footing, such as:
- Employee contributions could be raised, but tapered to discourage members on lower salaries from opting out.
- Savings could be made by raising the normal retirement age and reducing the rate at which pension benefits are earned.
- Local pension funds could be allowed more discretion to adjust the level of benefits offered to pension fund members.
- Local government employers should keep liabilities in check by controlling wage costs.
You can also download the technical appendices to the document, which summarise the more detailed analysis relating to the scheme.