Defined Benefit  

Govt to loosen pension rules for non-teaching staff

Govt to loosen pension rules for non-teaching staff

Further education, sixth form college and higher education corporations will have the choice to enrol their non-teaching staff in a pension scheme of their choice.

This means that the new workers won’t have to be enrolled in the Local Government Pension Scheme, a defined benefit pension fund, which has been mandatory previously.

The change in the rules was proposed by the Ministry of Housing, Communities and Local Government, in a consultation published today (May 8).

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In the document, the government stated that the bodies were responsible for determining their own business models and for ensuring that their financial positions were sound.

As such, they "may value greater flexibility in determining their own pension arrangements for their own workforces," the consultation stated.

The LGPS is a funded scheme, which means liabilities can potentially fall back on other LGPS employers in the event of an employer becoming insolvent.

This means public bodies could be impacted financially if one of the other organisations fails.

But if the government's proposals are approved, each corporation would be able to decide for themselves whether to offer the LGPS to all or some eligible new employees.

Staff who are eligible to be a member of the LGPS before the regulations come into force meanwhile will have their right to membership protected.

Teaching staff will still be enrolled into the Teachers’ Pension Scheme, which is heading for an increase of up to 13 per cent in employer contribution rates due to calculation changes.

In September, the government announced it would be changing the rate used to calculate the liabilities of public sector schemes "to reflect the Office for Budget Responsibility’s long-term growth forecasts" and total employer contribution rates could increase by between 5 and 13 per cent of pensionable pay as a result.

These rates will be paid from April 2019 to end of March 2023, and the government's actuary department will calculate the employer contribution for each scheme as part of its valuations.

The government’s proposals have already received criticism from pension experts.

Neil Walsh, pensions officer at union Prospect, told FTAdviser that "this is part of an invidious trend, whereby government tries to make up for a failure to fund public services properly by granting more and more employers the flexibility to slash pension benefits offered to employees".

He added: "This is no way to address serious funding problems and it will ultimately backfire on institutions who choose to exercise any flexibilities.

"The proposal is hugely concerning to employees of the institutions concerned, but also public sector workers generally, and it will be opposed by their trade unions."

Sir Steve Webb, former pensions minister and director of policy at Royal London, noted that access to the LGPS was an attractive option for non-teaching staff in colleges.

He said: "If colleges are no longer required to offer this option to new hires it is hard to imagine that the replacement provision will be as generous.