Council pension scheme to change

More than a million council workers went on strike in March

Details of a revised pension scheme for 1.7 million local authority workers have been outlined by the government.

From April 2008, they will have to pay higher contributions, although the rate at which their final salary pension will build up has been improved.

In March, hundreds of thousands of council staff went on strike over plans to prevent certain staff retiring early without any penalty.

Those plans will now be phased in between now and 2020.

The local government minister, Phil Woolas, said: "These reforms will help to stabilise costs, while honouring the government's intention to ensure that no additional costs are imposed on taxpayers."

The proposed changes will affect staff in England and Wales.

New strike threat

Local government trade unions, which have been negotiating with the employers over the pension issue for the last few months, were furious at the government's intervention.

They claimed that neither they nor the employers had been aware that the government was about to make its announcement.

Keith Sonnet, the deputy general secretary of Unison, said the minister's statement was irresponsible.

"[Mr Woolas] has spiked these crucial talks in a totally unnecessary and hostile intervention," said Mr Sonnet.

"We were making significant progress, with the employers just about to consider fresh proposals aimed at solving this long dispute," he said.

Unison warned that if it was prevented from continuing its negotiations with the employers, it would hold another strike ballot of its more than one million members.

However, a spokesman for the department of communities and local government said: "We made it clear that we would bring forward proposals and make a written statement.

"The unions can continue talking to the employers and we will consider any comments they make on our new-look scheme."

The Rule of 85

For several years the government and local employers have wanted to rein in the cost of the local government pension scheme, because it has been made increasingly expensive by the improved life expectancy of council staff.

The employers focused on removing the Rule of 85, which was a particularly costly benefit.

Although the formal retirement age in local authorities has always been 65, this rule let staff retire early without any penalty if, at the age of 60 or above, their combined age and service came to at least 85.

This rule was finally ruled illegal under new age discrimination legislation at a judicial review in September.

It will however continue, as a transitional arrangement, for existing pension scheme members who would expect to benefit from it between now and 2020.

The new scheme

The new scheme will apply to all existing members as well as new joiners from 1 April 2008.

In the new scheme, there will be tiered contributions from the staff.

They will pay 5.5% on the first £12,000 of their pensionable pay and 7.5% above that.

On average, employees' contributions will therefore rise to 6.3%.

Under the current scheme, employees pay in an average of 5.8% of their salaries each month.

However, other benefits have been improved.

The rate at which pension builds up as a proportion of final salary will increase from 1/80 a year to 1/60.

Despite this, the local government employers' organisation says the overall cost of the scheme will still fall from 20.8% of the payroll to 19.5%