New Research: £54 billion black hole in council pension schemes revealed
Apr 2012 13

Includes breakdown of every council’s pension deficit

The TaxPayers’ Alliance (TPA) today reveals that councils across the UK had a combined pension deficit of £54 billion in 2010-11. The assets of all 101 local authority pension funds in the UK are dwarfed by their liabilities, creating a deficit which taxpayers are ultimately liable for.

CLICK HERE TO READ THE REPORT INCLUDING A FULL BREAKDOWN BY COUNCIL

The Local Government Pension Scheme (LGPS) is much more generous than most private sector pensions and is in urgent need of reform. Previous TPA research has found that the equivalent of £1 in every £5 of Council Tax was spent on employer contributions to the LGPS.

The key findings of this research are:

  • Local Authorities across the UK had a combined pension deficit of £54 billion in 2010-11. This is a fall from £91 billion in 2009-10, which was a particularly bad year for local government pension funds. But, even after a recovery, the latest combined deficit has still increased from £51 billion in 2008-09.
  • Birmingham City Council had a deficit of £1.3 billion, the biggest deficit in 2010-11 and the only council with a deficit of more than £1 billion. This is £1,292 per head of Birmingham’s population.
  • 14 local authorities had a deficit over £500 million in 2010-11, and 165 local authorities had deficits in excess of £100 million.
  • The local authority in Scotland with the largest deficit in 2010-11 was Glasgow City Council with £625 million. This is £1,054 per head of Glasgow’s population.
  • But the highest deficit per head of the local population in Scotland is Dundee City Council at £1,565 each.
  • The local authority in Wales with the largest deficit in 2010-11 was Cardiff City Council with £494 million. This is £1,450 per head of Cardiff’s population.
  • But the highest deficit per head of the local population in Wales – and the entire UK – is Merthyr Tydfil Council, with a pension deficit of £2,268 per head.
  • The local authority in Northern Ireland with the largest deficit in 2010-11 wasBelfast City Council with £74 million. This is £274 per head of Belfast’s population, the highest deficit per head of population.
  • Across London’s 32 Borough Councils plus the City of London and the Greater London Authority the total combined deficit was over £9 billion. This is one sixth of the overall deficit across all UK schemes.
  • The highest deficit per head of population in England is in Brent Council, with£2,267 per head, followed by Gateshead Council with £2,040.

CLICK HERE TO READ THE REPORT INCLUDING A FULL BREAKDOWN BY COUNCIL

Matthew Sinclair, Director of the TaxPayers’ Alliance, said:

“The deficit in the Local Government Pension Scheme remains a ticking time bomb that’s being left for future generations of taxpayers to deal with. With an ageing population and a crisis in the public finances, generous final salary schemes like the LGPS are inflexible and too expensive, and need urgent reform. Councils should not take false comfort in the improvement in the stock market. Their pension liabilities continue to far outweigh their assets and the situation remains worse than two years ago.”

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  • Jim

    Please get your facts straight on local government pensions!You claim that £1 in every £5 of council tax goes towards local government pensions. The actual figure is just 5p in every £1 paid in council tax.
     
    This is because council tax makes up just 25% of a council’s overall funding.
     
    The remaining 75% comes from other sources such as business rates and central government funding. You also miss the whole point of pensions when you claim that the local government pension scheme faces a ‘black hole’. This is pure fantasy.
     
    By comparing liabilities to assets, you are making a ridiculous assumption…namely that that everyone will retire on the same day!
     
    Any actuary worth their salt will tell you that with pensions it is vital to take a long-term view.
     
    May be worth you consulting one!
    In reality, the local government pension scheme is a sustainable and affordable way of helping low paid workers to save for their retirement.
     
    Without the scheme, the taxpayer would be left holding a multi billion pound means tested benefits bill. The fact that most private-sector schemes are pathetic does not mean the average pension in local government is “gold plated”.
     
    It is just £4,000 a year, dropping to just £2,600 for women.

    • MooG

      Utter bollocks. Get your own facts straight.

      “the actual figure is just 1p in every £5 collected in council tax”

      No, no it isn’t.

      Council Tax may indeed only make up 25% of a council’s total funding, but the fact remains that one pound in every five collected IN COUNCIL TAX goes to fund pensions. Where the council gets the rest of its money from is irrelevant in this instance.

      “the local government pension scheme is a sustainable and affordable way helping low paid workers”

      This would be the same scheme the OECD deemed “dangerously unsustainable”? Or that the Hutton Report warned was in need of urgent reform? Keep telling yourself that, mate.

      “It is just £4,000 a year, dropping to just £2,600 for women”

      Only when you include everyone who’s ever qualified, irrespective of how long they may have worked. It’s dangerously disingenuous. Career-average pensions (ie. not including those who only worked for a council for a few months) are considerably more generous than their private sector equivalents.

      • Blarg1987

        You are missing the point on council tax funding, it IS relevent where council’s get their funding from, if you do your research then you will know local council’s are responsible for pensions andnot funding from whitehall, which is the main funding for councils.

        If we go by what you are saying about it council funding being irrelevent would be me saying that large multinationals are technically bankrupt, based on the part of the company the losses are based in, we all know to quote that that is utter bollocks but as you said it is irrelevent where they get the rest of their money from.

        All the facts should be laid out completly impartial of both left and right wing views with ALL supporting evidence my biggest fear is that we are playing a game of screwing each other over as of course private sector companies have very generous final salary schemes, but as you said it is irrelevent the point about it only being for CEO’s and not for the works force!

        Either be consistant for both public and private sector or not say anything at all!

    • Chavtrader

      These councils can soon find money for gay parades, needle exchanges and asylum seeking poncers when it suits them.
      They love to spend OUR money on THEIR politically correct crap, and then start whining and crying whenever a member of the public starts criticising them and their politburo councils.
      ‘Jim’ (above) should go and stick his head in an oven, that’ll be four grand’s worth of moaning the country won’t have to put up with.

  • pauldanon

    Councils must sell assets to solve this debt – buildings, parks – they can explain why to voters. Councillors need to be voluntary, not paid.

  • William grist

    I am a public sector worker  (NHS)  and i am getting sick of the war on people like me and my pension….fact…i have paid into my scheme.it is not free…fact,,,i will have to work forty years to recieve a FULL  pension = to half pay……fiction i will recieve a pension after one days employment ….fact retirement age is 60 female 65 male……the only people who recieve a full free public pension are the bosses who are given pension rights as an incentive to take the post,  also by moving from one authority to another they can accummalate  several pension pots

  • Rsd

    Do not think its the workers who are to blame its the boss’s who get inflated salaries take early retirement along with severance pay & finale salary pensions only they have the power to give themselves  such high pay & pensions it as to stop very soon or perhaps we should withhold some of our council tax 

  • Foolsgold Gordo

    I’m sure if Gordo Brown hadn’t started the ongoing pension fund plunder back in 2002, there would be no problem with fundingthe  pensions.  That’s the trouble, there is always somebody casting an eye about for funds to take the flak off their backs.  It doesn’t matter whether it is large companies having a pension holiday (seems rediculous now) or newspaper magnates short of a yacht or two or some stupid chancellor wanting to fund some inane scheme.  If the gov.uk stopped the plundering, maybe the pensions would recover.  It’s disgusting to villify workers who have signed up to a scheme in all good faith and then want to pull the rug from under them.  Shame on Gordo Brown ( it was true what Clarkson said about him).

  • http://twitter.com/ukgoldbug Gold Bug

    What would be interesting is a chart to show how many of the worst deficits occur in Labour controlled councils. 

  • John

    absolute garbage

  • Rob Moore

    I wrote to my Councillor about this in Southend. This is his response.

    Background to the figure and calculation per capita:The £126 million refers to the deficit on the pension fund at 31/3/11 – the figure shows in the 2010/11 accounts as £126.315 million. This is made up of £372 million as the fair value of liabilities, less £246 million as the fair value of assets. The scheme actuary calculates the figures for the pension fund as a whole and notifies us of Southend’s share of the fund.£126 million divided by a Southend population of 165,000 gives £764 to the nearest pound. The settlement figures from DCLG give the following projected population figures: 2011: 165,994, 2012: 167,108. So a working estimate of 165,000 for Southend’s population is reasonable.But this is a snapshot of the fund value which, if it closed today, would take 30 year for all liabilities to be realised and share prices / investments can go up as well as down. This acually explains why the LA pension payments and benefits must change; part of coalition policy.Liabilities have been assessed on an actuarial basis by Mercer Limited, an independent firm of actuaries, estimates being based on the last full valuation of the scheme as at 31 March 2010. The liabilities show the underlying commitments that the authority has in the long run to pay post employment (retirement) benefits. Statutory arrangements for funding the deficit mean that the financial position of the Authority remains healthy, with the deficit on the local government scheme being made good by contributions over the remaining working life of employees (i.e. before payments fall due), as assessed by the scheme actuary.

  • Foolsgold Gordo

    They’ll just have to use the receipts from the gordo pension tax to pay the pensions then.  Trouble is the goose that’s left, isn’t enough to cover all the eggs we could have had!