March 2006
Dear Member,
Local Government Pension Scheme (LGPS) Removal of the 85-year Rule
Background
In the most recent issue of For Your Benefit we told you that the Office of the Deputy Prime Minister (ODPM) is consulting on proposals to remove the 85-year rule from the LGPS from 1 October 2006. The 85-year rule means that you can retire from age 60 without a reduction to your pension if your age and your membership in the Scheme add up to 85 or more. If you are under age 60 and meet the 85-year rule, you need to have your employer’s permission to retire before age 60. If the ODPM successfully removes the 85-year rule, it means that your pension benefits could be reduced if you retire before age 65. In other words, the ODPM wants LGPS members to work until they are 65.
Protection proposed by ODPM for current members who would meet the 85-year rule
Why remove the 85-year rule?
Firstly, the ODPM considers the 85-year rule to be ‘age discriminatory’ and therefore illegal. Secondly, the ODPM sees the LGPS to be under financial strain and thinks that removing the 85-year rule will reduce pension funds’ long-term liabilities and therefore reduce that strain.
Trade Union opposition
The Trades Unions plan to ballot members for strike action against removing the 85-year rule. West Yorkshire Pension Fund’s views In the light of the Trades Unions’ opposition, we feel that it’s important that you know the Fund’s views on this issue. We have responded to the ODPM as part of the consultation process and made it very clear that we are totally opposed to the removal of the 85-year rule for all existing members of the LGPS. We think that removing the 85-year rule would break the ‘pension promise’ to anyone who joined the LGPS based on the rules in operation when they joined. We also think that the ODPM’s belief that the 85-year rule is unlawful is questionable.
West Yorkshire Pension Fund’s financial situation is presently very sound and does not support the ODPM’s concern that the LGPS is under financial strain. Our assets total around £6.3 billion, and our annual income from contributions and investments exceeds the amount we pay out in pensions each year by more than £150 million.
We particularly wanted to let you know our viewpoint on the removal of the 85-year rule and hope you will find this letter reassuring. However, we can only make our views known to the ODPM, and the ODPM will decide if the 85-year rule is removed.
If you have any questions about the contents of this letter please phone our Contact Centre on 01274 434999.
Yours sincerely
Councillor Ian Greenwood
Chair, West Yorkshire Pension Fund Joint Advisory Group
Stuart Imeson
Head of Pensions and Investments