An East Ayrshire councillor has sought assurances that employees’ pensions are protected after it was revealed that local authorities could reduce their contributions.

Last month members of Strathclyde Pension Fund Board agreed that councils could pay less into the fund, after it was revealed that the scheme had a massive £10 billion surplus.

The board agreed that councils which are part of the scheme could reduce their contributions from 19.5 per cent to 6.5 per cent for two years.

The contribution would increase to 17.5 per cent in the third year onward.

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SNP councillor David Richardson said: “While this will obviously be a welcome saving for hard pressed local authorities, I’m just slightly concerned that these decisions have been taken over a three year period at an exceptional time.”

He said that he been told such a surplus was an ‘anomaly’, and cited an example of a company he worked for which had taken a ‘contributions holiday’ only to be left having to pay out a large lump sum.

He continued: “Are the actuaries who look after the Strathclyde Pension Fund able to prepare a statement showing that, if we go ahead and reduce our employer contribution, that this will have no effect on the future benefits that can be expected by our current staff and those ex-East Ayrshire Council employees and their surviving partners?"

East Ayrshire’s chief financial officer Joe McLachlan explained that the actuaries looked at hundreds of factors when determining the status of the pension fund.

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This includes financial information such as gilt rates to more socio-economic factors.
As an example, Mr McLachlan said that the estimate of the lifespan of members had been overstated.

He said: “Sadly we’re not living as long as they actually thought were going to and that’s had a massive impact.”

However, the main driver for the surplus has been a decision that increased a ‘discount’ on employer contributions from 3 per cent  to 5 per cent.

Mr McLachlan said that he and his fellow council finance officers across Strathclyde had been concerned about the risks involved, but said they had received assurances that it was the prudent move.

He added that the council would not commit to a reduction if it was to impact on staff and pensioners.