Council pension deficit ‘£100bn’

Mr Ralfe says the scheme’s liabilities have soared 41% over the past three years

The deficit in the Local Government Pension Scheme in England has more than doubled in the last three years from £42bn to £100bn, research suggests.

This deficit is equivalent to about 7% of the UK’s annual economic output, and compares with a shortfall of £42bn three years ago.

The report was conducted by John Ralfe, an independent pension consultant.

The Local Government Pension Scheme in England has four million members including 1.7 million current workers.

It is a single scheme, although it is administered through 81 regional pension funds.

According to Mr Ralfe, the value of assets in the scheme have risen just 8% in the past three years, to £132bn, whereas liabilities have soared 41% to £232bn.

This increase in liabilities has been caused by a number of factors, including a rise in the value of benefits for local authority staff, and a fall in interest rates.

In future, the scheme will be uprated in line with the Consumer Prices Index – a generally lower measure of inflation than the Retail Prices Index.

Mr Ralfe estimates that will save £20bn, but he believes that taxxpayers and scheme members will have to pay more into local authority pensions – some £4bn extra a year.

However, Mr Ralfe says that the official actuarial deficit which the scheme will unveil next spring will be considerably lower, because it is allowed to use much less conservative valuation methods than private sector schemes.

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