Lib Dem pensions spokesman Steve Webb has claimed the total pension deficit of local authorities in England and Wales is likely to hit £60 billion this year.
If true, it would mean the deficit has increased by nearly a billion pounds a month since 2007.
As the BBC reports:
Using the Freedom of Information Act, Mr Webb obtained internal estimates from some councils, which showed:
- 83 of 87 local authorities were in deficit at their last official valuation in 2007 before the stock market slump and recession.
- Since then, 10% of funds have conducted their own valuations which showed deficits have grown by more than 280% on average.
The Lib Dems said if this was replicated across all pension funds, the next valuation – due in March – would uncover a deficit of more than £60bn.
Mr Webb said if the deficit has increased, current regulations would force councils to plug the gap, by either cutting services or raising council tax.
Pensions consultant John Ralfe believes the deficit could be even higher than £60bn, which would result in higher employer contributions.
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4 Comments
And people wonder why the Conservatives keep banging on about curbing public sector pensions.
Amazing figures.
Serious problem indeed !! What do you propose to do about it ?
I wonder if we’ll now see councils trying to force people away from final-salary pensions in the same way that several large industries have recently done through fair means or foul. I believe that Chris Huhne is campaigning on this issue in his constituency…
And people wonder why the Conservatives keep banging on about curbing public sector pensions.
Said banging on is often on the assumption, or at least wants to give the assumption, that local government pension payouts are funded entirely from current taxation. As the article indicates this, though widely believed, is wrong. Councils have investment funds which are meant to pay the pensions.
The funds have been invested using the same basis that the private sector uses to sell its financial products. As we know, the private sector selling pension products and the like extensively misled British consumers by suggesting a higher rate of return than we have observed.
So why kick the public sector and wish to cut the pensions of dinner ladies and street cleaners and the like, when private sector investment managers got us into this mess, and they are getting even bigger bonuses now for being such clever people?