UK - The Scottish Government is consulting on draft regulations for a new Local Government Pension Scheme (LGPS) which it claimed could save around £20m (€27m) per year.

The new scheme, which will be introduced from April 2009, is designed to be "affordable, sustainable and fairer for employers, scheme members and taxpayers", and one of the key features is an increase in employee contribution rates to an average of 6.3%.

Employee contributions will be tiered so lower-paid staff contributes less and higher-paid staff pay more, but at the same time employer contribution rates will fall from 13.9% to 13.3%.

However, the new scheme will mirror other LGPS schemes by providing a defined benefit of 1/60th of final salary for each year in service, while partners' pensions have been modernised to allow co-habiting partners to receive benefits, while lump sum death in service payments will increase to three times final pay.

In addition, the scheme will retain a normal retirement age of 65, however the Scottish government pointed out it will offer members the flexibility to work reduced hours beyond the age of 65 while taking part of the pension.

The new scheme follows work by the tripartite Scottish Local Government Pension Advisory Group (SLOGPAG) - consisting of representatives from the Scottish government, the Convention of Scottish Local Authorities (COSLA) and trade unions - in response to the UK government's decision to reform public service pension schemes.

Although occupational pension schemes is the responsibility of the UK government, scottish ministers have 'executively devolved powers' to allow them to make changes to public pension schemes in Scotland, as long as the changes remain in line with UK and European primary legislation.

The new scheme design was also partly triggered by the removal of the Rule of 85 - where members could retire on an unreduced pension before age 65 providing their age and number of years worked equal 85 - in December 2006 after it was confirmed the rule did not comply with the EC Directive on equality in the workplace.

As a result, the Scottish government devised transitional protection for eligible members, and made a commitment to reinvest the savings from the removal of the Rule of 85 into the new LGPS scheme.

After an initial consultation on the scheme design, which ended on October 31 2007, SLOGPAG has now issued draft regulations that will be open for consultation until March 27 2008, then the Scottish Public Pensions Agency (SSPA) will implement the changes from April next year.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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