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Local Govt Pension Scheme could face £60bn deficit

The Local Government Pension Scheme could face a deficit of more than £60bn next year, research by the Liberal Democrats reveals.

Freedom of Information requests made to pension fund managers in charge of the pensions of county, unitary, district and borough councils in England and Wales show that 83 out of 87 were in deficit at their last official valuation in 2007.

Since then, one in ten funds have conducted their own valuations, with deficits up more than 280 per cent on average.

Assuming this trend is replicated across all local government schemes, the Lib Dems say next year’s official valuation stands to uncover a deficit of more than £60bn.  

The party says under current rules, councils would be forced to plug the gap of any increase in the deficit, which could mean a combination of service cuts and council tax hikes.

It says in response, the Government has “quietly” launched an informal consultation on removing the obligation on the funds to be 100 per cent funded.

Lib Dem Shadow Work and Pensions Secretary Steve Webb says: “The Government has failed to grasp the nettle of local government pensions funding.

“A failure to set aside enough money and run the scheme responsibly means millions of people could be faced with cuts to vital services and council tax hikes, hitting pensioners especially hard.

“Thanks to ministers sticking their heads in the sand many vulnerable people will suffer.”

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Comments

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  1. The argument for gold-plated local authority and civil service pensions was that it made up for them being paid less than the private sector.
    In the vast number of cases this no longer applies so now is the time for them to bite the bullett. I’d suggest either the scrapping of the final salary pension scheme for all public sector workers or a 20% reduction in their salaries accross the board to compensate for their pension advantage

  2. … given the well-known problems many FS schemes are having with funding (eg BA, ITV), ain’t it about time they (LGPSs) finally bit the dust??

    Sadly, we simply CANNOT go on funding the public sector ‘gold-plated’ pensions (inc MPs) any more … … PERIOD!!

    We then need to curtail Public Sector spending drastically (and asap) – as proposed by the Tories … and before you ask, I’m not a Tory!!

    Labour made this mess by expanding the PS (and their inflated pensions), they should have the b*lls to say enough-is-enough … …

  3. Most ministers dont give two figgs about the long term. Its all about now and what they can do to try and ensure re-election.

    We will not begin to solve the massive issues we face in future years (both public and private sector) until pensions are removed from politics.

    Build a rolling 50 year strategy by using the brains in the industry, not the whim of some minister who was looking after a different department a week ago.

    Get all party agreement and stick to it. We may, just may, then have a future!!

  4. I’m not sure what is going on in local government but I suspect any pension deficit increase is as a result of increasing salaries which have increased under various “restructuring” banners.
    This year I was approached by a Local Goverment employee for investment advice on a redundancy payment which was being made within 4 months of her normal retirement date. Where is the sense in that?

  5. So Gordon Brown having killed off private sector DB schemes, meaning that more and more people will be dependent on the state in future years, has failed to address this problem also. About par for the course with Gordon, if he can duck a decision then he does, or vanishes like McCavity!

    Obviously we understand its difficult for Gordon to address this issue, after all it might just put his own indexed pension under the spotlight.
    But he has probably calculated that by the time the s…t hits the fan he’ll be out of the direct firing line (he has form at always calculating and manoeuvring) Either that or he believes that continually expanding the public sector is the way forward. Very Old Labour that, but unfortunately my instincts when he was first elected that he was at his heart a ‘Tax and Spend’ Chancellor have been proven correct. Despite his early years trying to tell us that he wasn’t like that it only took two years for the Old Labour attitudes to start coming to the fore.

  6. The problem with the final salary pension schemes is it is linked to final salary which means it benefits people on higher salaries. A way of bringing much-needed changes to this scheme would be to bring in a salary cap. This with both reward those people on low salaries like nurses, cleaners, etc but not over reward those on the high salaries they have more than enough spare money to make additional private contributions themselves e.g. highly paid consultants and civil servants and indeed in my local authority the leader of Suffolk county council who is paid £235,000 a year plus pension no wonder there is a shortfall. The same goes for in the Armed Forces where you can have a Private earning less than £20,000 but a Colonel earning £160,000.

    Like so many decisions that need to be made these are difficult but there are very simple solutions to them, it’s just that the people making the decisions are the ones on a high salaries !! No doubt they’ll want to screw the people further down the line

  7. When will these idiots in national and local government realise that there is not a bottomless pit and the tax payer both national and local cannot afford final salary pensions anymore. Have we got to take to the streets to make our point like we did with the pole tax!!!

  8. Pure and simple mismanagement. I guess the government are hoping/praying that improved investment performance in the future will recover some of the current deficit.

    The councils should be run like a plc. Most plc’s have either closed their final salary schemes to new members or completely and changed to money purchase.

    Get your acts together and act responsibly with the revenue you receive from the taxpaying public !

  9. Those that have will always have.
    Those that have not will never have.
    Those of us in the middle will pay for both.

    The only way to solve these issue is for totally and utterly independent pay bodies to set pay in these sectors and that aint gonna happen this side of the next decade/millennium.

  10. Actuaries Hymans Robertson, calculate some 26% per cent of council tax receipts now goes towards public sector pensions, and there’s is now every possibility this figure will rise.

    It is important that public sector employer’s emplyee’s pay the full costs of their pensions promises. Those of us in the private sector need to ask:

    Why should you save for two pensions, your own and his, when he is perfectly capable of taking ownership and personal responsibility for his own pension? You should make it clear to your MP that you object to the Government acknowledging the demise of the Defined Benefit Pension Scheme (perhaps your own pension and future) in the private sector, then telling you that you need to save more and are not to expect to retire before the age of 70, while at the same time the Government and public sector unions expect you as a private sector workers to pay taxes to fund public sector pensions so that public sector workers can retire at 60 and earlier on a guaranteed index linked scheme for life. How fair is that Gordon? Could this be the government protecting its electoral voting base?

  11. … given the well-known problems many FS schemes are having with funding (eg BA, ITV), ain’t it about time they (LGPSs) finally bit the dust??

    Sadly, we simply CANNOT go on funding the public sector ‘gold-plated’ pensions (inc MPs) any more … … PERIOD!!

    We then need to curtail Public Sector spending drastically (and asap) – as proposed by the Tories … and before you ask, I’m not a Tory!!

    Labour made this mess by expanding the PS (and their inflated pensions), they should have the b*lls to say enough-is-enough … …

  12. One further thought … …

    With our burgeoning LGPS deficits, FS deficits and personal/Government indebtedness, how long d’ya reckon it’ll be before our well-prided UK plc AAA-rated status plunges like the Zeppelin … …

    Then we’re on the downhill leg of a l-o-n-g journey … …

    Difficult economic/political decisions need to be made urgently – a la Paul Volcker (US fed Res) – may not be pleasant but if we bury our head in the sand, the next generationS will inherit diddly-squat (apart from a whole shed-loada problems)

  13. Guess I will just have to fork out a bit more from my state pension, to pay the extra Council Tax in order to fund LGA pensions, Oh dear one rule for one and one for the rest of us !!!!!!!!

  14. I do not feel that it is the ratepayers of the country’s responsibility to plug this gap at all.
    Perhaps the government should really think about what is really important to us in this country, rather than spending billions on foriegn war campaigns that we can no longer afford. Let some of the emerging economies take the strain. I know that a lot of local government employees will feel very worried about this development and any changes they are facing but they must understand that in many cases, the private sector has taken the strain and had to adapt, as they must too. No longer should local taxpayers have to bear the burden of their subsidised pension contributions.

  15. One further thought … …

    With our burgeoning LGPS deficits, FS deficits and personal/Government indebtedness, how long d’ya reckon it’ll be before our well-prided UK plc AAA-rated status plunges like the Zeppelin … …

    Then we’re on the downhill leg of a l-o-n-g journey … …

    Difficult economic/political decisions need to be made urgently – a la Paul Volcker (US fed Res) – may not be pleasant but if we bury our head in the sand, the next generationS will inherit diddly-squat (apart from a whole shed-loada problems)

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