HL Deb 08 February 2005 vol 669 cc27-8WS
The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)

My honourable friend the Parliamentary Under-Secretary of State has made the following Written Ministerial Statement.

The Office of the Deputy Prime Minister has today published a consultation document setting out proposals for new financial arrangements for firefighter pensions.

The Firefighters Pension Scheme is currently financed on a "pay-as-you-go" system. This means that employees' contributions are paid into fire and rescue authorities' operating accounts from which pensions awards are made. Authorities receive funding from central government to support pension payments as part of formula grant.

The current system for financing firefighter pensions can cause volatility in pension expenditure as a result of lump-sum retirement payments. It can also be difficult to establish what proportion of budget and council tax increases is the result of rising pension costs as opposed to the cost of running the service. Further, over time the forecast growth in pension costs would see pension expenditure rise as a proportion of authorities' budgets.

The new financial arrangements we are proposing are based on employer contributions and are similar to those used for other unfunded public service pension schemes such as those for teachers, civil servants, NHS staff and the Armed Forces.

The new arrangements would mean that employee contributions and a new employer's contribution would be paid into a new local pension account, from which pensions payments would be made. Government would make up the shortfall as necessary. At the outset, appropriate adjustments would be made in the level of grant so that neither local nor national taxpayers would be disadvantaged.

The new arrangements would be for both the existing and new firefighter pension schemes, but would have no impact on the terms and conditions of either scheme.

Consulting on these proposals is part of the Government's commitment to review the financial arrangements for firefighter pensions which was made in the 2003 White Paper Our Fire and Rescue Service and reiterated in the 2004–05 and 2005–06 fire and rescue service national frameworks.

Copies of the consultation document have been sent to fire and rescue service stakeholders, including chief fire officers, chairs of fire and rescue authorities, the LGA and the Fire Pensions Committee. The consultation period will be for 12 weeks and will close on 3 May 2005.

Copies of the 2005–06 national framework are available in the Libraries of the House.