UK - The UK government has given the strongest indication yet that local government pension schemes (LGPS) are to be excluded from proposed contribution hikes.

The news comes on the eve of national strikes, with a number of civil service and teachers unions intending to oppose a number of changes to pension schemes, including a 3.2% increase in employee contributions.

In a joint statement after talks between the government and union representatives ended in deadlock, chief secretary of the Treasury Danny Alexander and cabinet minister Francis Maude said they recognised the funding basis for the more than 80 local authority schemes was different.

They said: "There are important implications for how the contributions and benefits interact, as both Lord Hutton and the unions have set out.

"On that basis, we have agreed to have a more in-depth discussion with local government unions and the TUC about how we take these factors into account."

The news was welcomed by the London Pensions Fund Authority (LPFA), which had argued the contribution increase would "seriously undermine" the system's long-term viability.

Mike Taylor, chief executive at the LPFA, said: "Although we do not disagree a rebalancing of risk and cost should happen, increasing contributions by such an amount in such a short time is a very blunt instrument when compared with other options available to a funded scheme."

He added that there had been a growing number of people - ranging from actuaries to unions - who opposed the increases.

"I am, therefore, very pleased that the government has listened and acted," he said.

The change in approach was first signalled last week, following renewed warnings from Lord Hutton and the outgoing chair of the Local Government Association Baroness Eaton about the impact of the contribution increases on the system's investment potential.

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