LGPS is viable, LGA tells Taxpayers' Alliance

13 Apr 12
The Local Government Association and unions have denied claims that council pension funds are a financial ‘time bomb’.

By Richard Johnstone | 13 April 2012

The Local Government Association and unions have denied claims that council pension funds are a financial ‘time bomb’.

PensionsISTOCK

The Taxpayers' Alliance said that in 2010/11, there was a £54bn gap between assets and liabilities in the balance sheets of the 101 members of the Local Government Pension Scheme. Although the deficit had fallen from £91bn the previous year, due to rising share values, it still showed the need for ‘urgent reform’ to reduce the eventual liabilities on taxpayers, the alliance said.

Birmingham City Council had the biggest deficit at £1.3bn, the only authority with a gap greater than £1bn, according to the pressure group. Fourteen local authorities had deficits of more than £500m and 165 more than £100m.

In Scotland, Glasgow City Council had the largest deficit at £625m, while in Wales it was Cardiff City Council, with £494m. In Northern Ireland, the highest was Belfast City Council at £74m.

Taxpayers' Alliance director Matthew Sinclair said: ‘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.’

But the Local Government Association said that the nominal deficit was a ‘spurious way of gauging the viability of a pension scheme’.

LGA workforce board chair Sir Steve Bullock said the year-old figures had ‘no relevance to the actual cost of local government pensions’.

He added: ‘Councils have taken steps to ensure the schemes, which are significantly funded by contributions from employees, are affordable for taxpayers, fair to workers and viable in the long term.

‘The fact that the nominal deficit fell by £37bn in just a year shows that we are getting it right and that the supposed ticking time bomb is already being defused.’

Trade unions also criticised the report as incorrect. Unison said that by comparing liabilities to assets, the report was ‘making a ridiculous assumption that everyone will retire on the same day’.

Heather Wakefield, the union’s head of local government, added: ‘The so-called Taxpayers’ Alliance should stop attacking the pension rights of low-paid public service workers such as dinner ladies and bin men, and concentrate on getting its facts straight.

‘Back in reality, the Local Government Pension Scheme is a sustainable and affordable way of helping low paid workers to save for their retirement. Without the scheme, the taxpayer would be left holding a multibillion pound means-tested benefits bill.’

The GMB union said that ‘intensive, evidence-based negotiations are currently under way as unions and employers work towards a reform package’ that ‘will support a sustainable Local Government Pension Scheme for generations to come’.

The report comes after umbrella group London Councils confirmed on Tuesday that London councils were examining whether savings could be made from merging the 34 current schemes across the capital.

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