Members, mostly working in the CRCs, who are not eligible to be active members of the Local Government Pension Scheme may see their pension contributions increase from 6 April 2019.
This is because of a statutory increase in the minimum contribution to pension schemes imposed by the Government as part of the auto-enrolment regulations. The minimum amount paid into the pension must be at least 8% of earnings. The Government’s guidance suggests employees paying 5% and employers 3%, but employers can choose to pay a greater share and the split will depend upon the specific scheme and employer.
In the LGPS, contributions already exceed the 8% minimum so the changes will have no impact – even for members in the 50:50 scheme who pay half as much as for half the benefits, because the employer contributions in the LGPS are already between 15-20%.
Napo thinks the change will most likely impact on members who have joined a scheme since the probation split and where they have sought to minimise their contributions, possibly because of continued pay restraint. Dean Rogers, Napo AGS and pension lead explains: “Auto-enrolment has been successful in increasing the number of people with a workplace pension, partly because it was carefully phased in over more than 10 years. But many people are still not generally saving enough for their whole retirement. That’s why contributions are going-up.”
He adds: “It is critical people understand the importance and value of their pension and try to resist any temptation to opt-out. Because the employer has to pay in as well, a pension scheme is a good savings plan. In addition, there are lots of tax benefits to encourage you to save rather than be totally dependent upon the state pension in your old age. But we recognise it is hard to tell people to save for a rainy day if it is pouring down now. We will be tracking the number of people who opt-out and challenging employers to do more wherever there is an issue.”
Members considering making changes to their pension are advised to check out the pension page on Napo’s website, which includes links to other useful pension advice sites. We always recommend obtaining independent financial advice before making any pension decisions or choices.