LGPS deficit funds should pay for services, says think-tank

12 Aug 10
Councils should divert some of the funds they use for pension fund deficits into supporting vulnerable frontline services, the New Local Government Network has said today

By Vivienne Russell

12 August 2010

Councils should divert some of the funds they use for pension fund deficits into supporting vulnerable frontline services, the New Local Government Network has said today.

The think-tank recommends extending the time they take to pay off of the Local Government Pension Scheme’s historic deficit. This would better help council-run services survive the impending cuts, it says.

The LGPS is running a £20bn shortfall according to its last valuation, which took place in 2007. But in a report published today, the NLGN says that councils could divert some of the funds they use for the LGPS deficit towards revenue service provision. It has calculated that councils would free up £200m to support otherwise threatened services in 2014/15 if they cut their deficit recovery contributions by just 10%.

Report author Tom Symons said: ‘It is possible for councils to close their LGPS deficits in a long-term, sustainable way that is equitable to their workers and council taxpayers. This can even be done in a way that frees up money to help mitigate the effects of the tsunami of funding cuts facing local services in the short term.

‘All of this is possible but only if councils prepare cogent, transparent and well-structured long-term plans for the future of their pension funds, in collaboration with LGPS stakeholders.’

The NLGN is also making recommendations to Lord John Hutton’s review of public sector pensions.

It says the LGPS should be considered separately from other non-funded public sector pensions and should be given greater discretion of the shape of future reform, given the scheme’s history of conscientious fund management.

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