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A new report from the TaxPayers' Alliance (TPA) exposes the full extent of the black hole in council pensions. Against a background of dire problems in the public finances, the overly generous Local Government Pension Scheme (LGPS) is placing an unsustainable burden on taxpayers and on council budgets. The full report features specific data for each local authority in England, Wales and Scotland, and warns of the severe costs which will be incurred if the Scheme continues unreformed.
In February 2009, the TPA revealed that LGPS employer pension contributions alone were costing the equivalent of £1 in every £5 of council tax. One year on, this new report demonstrates that on top of that huge cost now, the Scheme is storing up large costs for the future, too.
Key findings:
- Councils across the UK had a combined pension deficit of £53 billion in 2008-09. This is up from nearly £42 billion in 2007-08 – an increase of 27 per cent.
- According to council's own actuarial estimates, the value of council pension assets fell by more than £21 billion during 2008-09 – a loss of 20 per cent on the previous year.
- Birmingham City Council had the largest deficit in 2008-09 - £1.05 billion.
- 15 councils had a deficit of over £500 million in 2008-09, up from 10 councils in 2007-08.
For full data on each council around the country, please see the full report.
John O'Connell, Policy Analyst at the TaxPayers' Alliance said:
"These deficits are a huge ticking time-bomb. Investment portfolios will have taken a beating in the credit crunch, but that is only part of the problem. No matter how good the markets get, the inescapable fact is that local authorities are running unsustainable final salary schemes that are now all but extinct in the private sector. Swift and firm reforms are essential to stop this deficit escalating further out of control in the long-term, and lighten the load on council budgets in the short-term. Local taxpayers already pay a fortune for these pensions, and it would be grossly unfair for local authorities to try and plug this gap with yet more tax rises.”