More redundancies means less paying members in the pension scheme

News that the Local Government Pension Scheme is losing members in droves is hardly surprising considering the job losses in the sector in the past year. Nor is it much of a surprise that neither the DCLG- which issued the figures - or the unions or employers have shouted it from the rooftops; after all, fewer members making contributions means less income coming into the scheme and more pressure on the funding level which is not helpful to the current delicate negotiations about reducing the LGPS's costs to the public.
The DCLG says the number leaving the scheme because of redundancy in the year ending last March was up 40% to more than 17,600. The number of former staff entitled to deferred benefits is also up. Many of these will be ex-employees who have left before retirement, either voluntarily or through redundancy. Not only do they cease to contribute but their deferred pension sits as a cost in the scheme ready for when they retire.
While the scheme's assets rely heavily on stock market performance for their income, a reducing number of paying active members is bad news. On top of this the town hall unions, in their campaign to prevent the government from forcing the LGPS to increase contribution levels, has already issued warnings that staff on average salaries - above the threshold for increased contributions - will quit the scheme because of its extra costs.
Another figure to bear in mind is the number of early retirements triggered by cutbacks. These in effect become another burden on the pension fund. A decade ago the Audit Commission issued a warning about councils using the pension fund as a means of managing out staff. In those days it could afford it; now it cannot.