From 1st April the Local Government Pension Scheme will replace the current fixed percentage contribution with contribution bands of between 5.5% and 7.5% dependent on salary level. This will have a significant discriminatory effect on the million + predominantly female part time staff employed in Local Government as the contribution bands will be based on the equivalent full time salary and not on actual earnings. As a result, if their full time equivalent (FTE) salary is in a higher contribution band than their actual annual salary, part time staff will pay more than full time staff earning the same annual salary for exactly the same pension benefit.

For example, if two members who both earn £11,000 pa, one for working full time (37 hours a week) and the other for working 18.5 hours, retire after 10 years their pensions will be the same
FT = 10 years x 1/60 x £11,000 = £1833.33 pa
PT = 5 years (as service accrues pro rata) x 1/60 x £22,000 (FTE salary) = £1833.33
but the part time member will have paid a whopping 18% higher annual contribution – the full time member pays £605 pa (5.5% of £11,000) but the part time member of staff pays £715 pa (6.5% of £11,000) because their contribution is based on the higher banded FTE salary of £22,000. The difference could be much higher, in a worst case scenario a part time member could pay up to 36% more for exactly the same benefits.

This will disadvantage the predominantly female part time members of staff and is the same, in principle, as applying the 40% tax rate to part time staff whose hourly rate is equivalent to £40,000 or more even though they are earning a salary that is well under the upper earnings threshold. Basing the contribution bands on FTE salaries affects part time staff disproportionately as affordability is linked to take home pay not hourly rates.

This does not contravene the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 [SI 2000/1551] as the comparator has to be engaged in the same or broadly similar work but, as basing pension contributions on FTE salaries rather than actual salaries disadvantages part time staff who are mainly women, does this amount to indirect sex discrimination?

Of the 2.25 million staff employed in Local Government around a half are part time, but less than 10% of the part time staff are male effectively meaning that the predominantly female part time work force is being used to subsidise the pensions of their full time colleagues. As over 90% of men working in Local Government work full time this has all of the hallmarks of yet another deal designed to protect male workers. Should the public sector be allowed to indirectly discriminate against women and disadvantage staff who may need to work part time due to family / care responsibilities?

Perhaps it would also be appropriate to ask why the predominantly female part time staff employed in Local Government have been targeted to fund the black hole in the pension scheme by making them pay higher contributions than full time staff earning the same annual salary.

Can anyone explain how someone who earns £11,000 pa for working 2.5 days a week can afford to pay more in pension contributions than someone who earns £11,000 pa for working 5 days a week? How can charging two members of staff earning the same annual salary different amounts for exactly the same pension benefits be justified when what they can afford is based on their take home pay?

In the interest of balance I should pooint out that if the contribution bands were based on actual salary, full time staff could end up paying a higher percentage contribution than part time staff doing the same job who will receive the same (pro rata) pension benefits which just goes to show that the move to earnings based contribution rates will lead to perceived disadvantage however it is organised.

Can anyone advise on the legality of this?
Alan