Pension provision costs are stirring fears among local authorities that have seen funding strategies...
Pension provision costs are stirring fears among local authorities that have seen funding strategies severely stretched by falling stock markets and increasing longevity, according to a new survey published by consultant Mercer.
It found that that majority of local authorities contributing to the Local Government Pension Scheme could only afford to raise contribution levels by an additional 2% compared to the existing long-term contribution rate of up to 12%.
These commitments are below that necessary to make up past under-funding and the increase in employer contributions that look likely to be required when the next round of valuations is due in 2004.
Mercer says the LGPS, which is a final salary scheme, will need to change and that local authorities will need to change investment strategies to get a grip on costs.
One option is more frequent reviews of the scheme's costs and benefits; reviews currently take place every three years, but more than half the local authorities surveyed by Mercer say they want less time between reviews.
Proponents of change must tread lightly, Mercer warns, because the current benefits of the LGPS mean there is a high take-up rate, and it is seen as a key method of attracting and retaining staff.
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