The cost of public sector pensions in Scotland Prepared for the Auditor General for Scotland and the Accounts Commission

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Part 2. Pension reform

Key messages

• Pension reforms implemented between 2006 and 2009 to help deal with rising costs included increases in retirement ages and in employees’ contribution rates for some schemes, changes to lump sums and changes to accrual rates. Many of the reforms only affect new members of schemes, or are being phased in gradually. Savings will be limited in the short term and will be fully realised only after existing scheme members retire in 30 to 40 years.

• A system known as ‘cap and share’ was introduced in the teachers’, NHS and civil service schemes to help limit employers’ costs. However, there is no such arrangement for the police and firefighters’ schemes. For the LGPS the timetable for agreeing a system for cost-sharing (without a cap) has slipped one year to March 2011.

• The present UK government is pursuing further pension reform. The Scottish Government has some influence on the way in which UK changes to pensions are implemented in Scotland, although this is limited by UK government legislative and financial constraints and varies for each scheme. Key issues for the Scottish Government to address include deciding how best to incorporate changes made at a UK level into the equivalent Scottish schemes; working with councils to decide on the extent and pace of further reform in the LGPS; and considering whether differences between schemes remain justifiable, fair and affordable.

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