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Top Tory warns of huge opt-out from council pensions

Conservative chair of the Local Government Association Bar-oness Eaton has attacked Government plans to raise pension contributions for local authority employees by 3 per cent.

In a letter to Chancellor George Osborne, Eaton warns there is “strong evidence” that there will be mass opt-outs from the local government pension scheme if the contribution increase is imposed.

She argues the state would ultimately pick up the cost as people will eventually fall back on means-tested benefits in retirement.

Eaton also says that a contribution rise at a time of pay freezes and rising inflation is “likely to lead to a significant worsening in industrial relations”.
Treasury officials are in talks with the Trades Union Congress over how the increase in contributions will be phased in from 2012.

In January, a survey by trade union the GMB found 39 per cent of local government pension scheme members would leave the scheme if contrib- utions increased. The GMB said if that proportion of people left the scheme, it could collapse.

But Affluent Financial Planning managing director Carl Melvin says: “I think Baroness Eaton’s intervention is extremely misguided. If you are not going to increase contributions, then what is the alternative?

“At the moment, the local government scheme is absolutely unaffordable and ultimately it is the taxpayer who pays for this.”

Last week, Centre for Policy Studies research fellow Michael Johnson presented a series of radical public sector pension reform proposals to Lord John Hutton’s Independent Public Service Pensions Commission, including automatically enrolling all public sector workers into Nest and setting out plans to move to full defined-contribution provision by 2020.

Hutton will present his report ahead of the Budget outlining how to make public sector pensions “affordable and fair”.

A Treasury spokeswoman would not confirm if the commission’s key recommendations will be implemented in the Budget on March 23.

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