Councils across the UK had a combined pension deficit of £54 billion in 2010-11, according to research by The Taxpayers’ Alliance.
This figure is down from £91 billion in 2009-10, but still an increase from £51 billion in 2008-09.
The research also found:
- 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.
- 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.
- The local authority in Wales with the largest deficit in 2010-11 was Cardiff City Council with £494 million.
- The local authority in Northern Ireland with the largest deficit in 2010-11 was Belfast City Council with £74 million.
- 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.
Matthew Sinclair, director of The TaxPayers’ Alliance, said: “The deficit in the local government pension scheme (LGPS) remains a ticking time bomb that is 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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Read more articles on pension scheme deficits
Firstly, the accounting basis for measurement of deficits quoted by the The Taxpayers’ Alliance is flawed in that these deficits would only be meaningful if all local government pension scheme (LGPS) funds invested all their assets in bonds.
However, funds are long-term investors, and can afford to take a longer-term view and invest in assets that are expected to produce higher returns in the long term.
Thus, funding deficits, which do reflect actual investment strategies, will be lower (maybe by between a third-and-a-half lower) and the deficits that actually matter are being funded via current levels of contributions.
Funds are a bit behind schedule in terms of their funding journey for many different and historical reasons, but have been, and continue to make up time by going a little bit faster to catch up.
We don’t need, nor is it usually possible, to catch up immediately, as there is still a long journey ahead.
Secondly, the LGPS is currently being reformed, essentially trading in the previous model, which has turned out to be more expensive to run than originally thought, to a more affordable model to ensure we still reach our destination of some reasonable and predictable level of retirement income. It might just a little longer to get there.