By Lucy Phillips
15 January 2010
The local government pension row flared up again after figures revealed a potential £60bn black hole.
The Liberal Democrats said today that the next official pensions valuation of councils in England and Wales, to be carried out in March, was likely to show the deficit had more than doubled from £27bn three years ago.
Research by the party revealed 83 out of 87 councils were in deficit when the last valuation was carried out in 2007. Since then, 10% of funds had conducted internal valuations, which showed deficits were up by more than 280% on average. If the trend is replicated across all local government schemes, the next valuation stands to uncover a deficit of more than £60bn.
Liberal Democrat work and pensions spokesman Steve Webb criticised the government for not relaxing rules for 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,’ he said.
Mike Taylor, chief executive of the London Pension Funds Authority – one of the largest local government pension scheme providers – told Public Finance that the £60bn estimate was likely to be correct and councils were well aware of the problem.
But he urged local authorities to wait until the valuation results came back, probably in the autumn, before reacting – and then to take a ‘long-term view’ to recovering the deficit. ‘Councils will think seriously about this over the next year but it’s not something we should rush into. There is no need for immediate action now,’ he said.
The LPFA has called for the government to review the scheme, warning that it risks being closed down altogether unless levels of benefits and contributions by members are looked at now. ‘It is perceived as being expensive and we are concerned about its affordability and sustainability in the long term,’ said Taylor. He also called for the scheme’s retirement to be raised from 65 because of rising life expectancy.
Unions, however, accused the Liberal Democrats of ‘scaremongering’. Unison general secretary Dave Prentis said the current pensions scheme, which was reviewed by local government employers a few year ago, was ‘fair, affordable and sustainable’. He added that not all councils had ‘mismanaged’ their pension funds, and many schemes were doing well.
GMB national secretary Brian Strutton said he expected the deficit to have improved since the 2007 valuation, not worsened. ‘Let’s not forget that the glass is more than half full – the local government pensions scheme has over £100bn in the bank for future council pensions, enough for the next 20 years, and runs an annual cash surplus,’ he claimed.
Ministers said they did not recognise the £60bn figure and it was consulting over plans to give local authorities more flexibility in managing their pensions funds.
15 January 2010
The local government pension row flared up again after figures revealed a potential £60bn black hole.
The Liberal Democrats said today that the next official pensions valuation of councils in England and Wales, to be carried out in March, was likely to show the deficit had more than doubled from £27bn three years ago.
Research by the party revealed 83 out of 87 councils were in deficit when the last valuation was carried out in 2007. Since then, 10% of funds had conducted internal valuations, which showed deficits were up by more than 280% on average. If the trend is replicated across all local government schemes, the next valuation stands to uncover a deficit of more than £60bn.
Liberal Democrat work and pensions spokesman Steve Webb criticised the government for not relaxing rules for 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,’ he said.
Mike Taylor, chief executive of the London Pension Funds Authority – one of the largest local government pension scheme providers – told Public Finance that the £60bn estimate was likely to be correct and councils were well aware of the problem.
But he urged local authorities to wait until the valuation results came back, probably in the autumn, before reacting – and then to take a ‘long-term view’ to recovering the deficit. ‘Councils will think seriously about this over the next year but it’s not something we should rush into. There is no need for immediate action now,’ he said.
The LPFA has called for the government to review the scheme, warning that it risks being closed down altogether unless levels of benefits and contributions by members are looked at now. ‘It is perceived as being expensive and we are concerned about its affordability and sustainability in the long term,’ said Taylor. He also called for the scheme’s retirement to be raised from 65 because of rising life expectancy.
Unions, however, accused the Liberal Democrats of ‘scaremongering’. Unison general secretary Dave Prentis said the current pensions scheme, which was reviewed by local government employers a few year ago, was ‘fair, affordable and sustainable’. He added that not all councils had ‘mismanaged’ their pension funds, and many schemes were doing well.
GMB national secretary Brian Strutton said he expected the deficit to have improved since the 2007 valuation, not worsened. ‘Let’s not forget that the glass is more than half full – the local government pensions scheme has over £100bn in the bank for future council pensions, enough for the next 20 years, and runs an annual cash surplus,’ he claimed.
Ministers said they did not recognise the £60bn figure and it was consulting over plans to give local authorities more flexibility in managing their pensions funds.
