TaxPayers’ Alliance reveals substantial rise in council staff drawing pensions compared to those paying in
Jul 2012 11

The TaxPayers’ Alliance (TPA) can today reveal for the first time a substantial rise in the number of former council staff drawing pensions compared to the number in work and paying into the Local Government Pension Scheme (LGPS). The new research also reveals that when the one million deferred members of the scheme (those no longer working at the council but not yet eligible to draw pensions) are considered, the outlook is even more alarming.

Click here to read the full report including full council breakdowns
Click here to look up your local data

The LGPS is much more generous than most private sector pensions. The future of the scheme is bleak unless urgent reforms are made. Previous TPA research has found that the equivalent of £1 of every £5 of Council Tax goes on pensions and that there is a £54 billion black hole in council pension schemes.

The key findings of this research are:

  • In 2010-11, there were fewer than 1.6 active members of local government pension schemes for every one drawing a pension. Five years earlier there were nearly 1.9 active members for every one drawing a pension. In the wider UK economy, there are 3.2 people of working age for each person of State Pension Age and over.
  • In 2010-11, there were 13 local authorities (listed in table 1) where those drawing pensions outnumbered active members by more than two to one. In 2006-07, there were eight.
  • The falling old-age support ratio is the result of a rising number of former employees drawing pensions. There were 910,000 former local authority employees drawing a pension in 2010-11, up from 771,000 in 2006-07 and an increase of 18 per cent.
  • In 2010-11 there were over 1 million deferred members on the LGPS, 300,000 more than in 2006-07. As more of these members begin drawing a pension, the gap between scheme pensioners (currently 910,000) and active members (currently 1.5 million) is likely to close.
  • Across the UK, 345 local authorities have more deferred and pensioner members than they do employees paying into schemes. There are only 61 councils where those paying into schemes outnumber those drawing a pension and those with benefits to draw at a future date.

Click here to read the full report including full council breakdowns
Click here to look up your local data

Matthew Sinclair, Director of the TaxPayers’ Alliance said:

“The Local Government Pension Scheme faces a bleak future as more and more pensioners claim from a pension pot that fewer and fewer current staff are paying into. Unless changes are made so that the local government workers who will benefit from these pensions pay more of the cost, there is a real risk families struggling to afford much less generous pensions will be left with the bill. Unions and councils need to be realistic and ensure reforms are sufficient to deal with the pressures on the finances of town hall pensions. The Government need to ensure that taxpayers aren’t left with a ticking financial time bomb.”

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  • me_me

    So we pay very high tax and live very poor for them to live very well. What does it mean WELFARE state then. Shall I give up my job and go no the benefit so get something out of state.

  • blarg1987

    Interesting report, however there is no break down on detailed figures, such as the years services people have done, estimated growth of pension funds, future recruitment etc.
    Like all pension pots of both the publi, private and CEO sector they are facing shortfalls mainly from the fall out of the financial crisis, and many pensions analysis have concluded that it will take a longer term for these losses to be brought down as the stock market and investment funds grow.
    I feel this report is not detailed enough and is more sensational journalism then detailed accurate inpartial evidence.

    • Kobi

      Well here’s some detail for you. The Scottish local govt pension schemes are so generous, that you have to be earning more than around £20,400 before the total you pay in income tax & NI to HMRC exceeds your employer’s contribution to your pension i.e. you pay nothing from that towards the NHS, schools, local govt, education, the benefits system, defence etc etc. All your income tax & NI is spent on providing your local govt pension.

      In addition, no local govt employee in Scotland has less than 50% of their total income tax and NI deductions going towards their employer’s contribution to their pension i.e. more than half of what they pay in payroll taxes comes back to them as pension contributions.

      I suspect that the position is similar for every local govt pension scheme in the UK.

  • Dominic Granite

    Taxpayers Alliance calls for budget cuts in the public sector and redundancies. Staff take retirement to meet those cuts. Pension schemes become unaffordable so the state has to pump more money into them. It’s not rocket science. Be careful what you wish for.