The Local Government Pension Scheme could face a deficit of more than £60bn next year if current trends continue, Liberal Democrat research has revealed.
Freedom of Information requests made to pension fund managers in charge of the pensions of county, unitary, district and borough councils in England and Wales show that:
83 out of 87 were in deficit at their last official valuation in 2007 before the stock market slump and recession took hold.
Since then, one in ten funds have conducted their own valuations, with deficits up more than 280% on average.
Assuming this trend is replicated across all local government schemes, next year’s official valuation stands to uncover a deficit of more than £60bn.
Under current rules, councils would be forced to plug the gap of any increase in the deficit, which could mean a combination of service cuts and council tax hikes.
In response, the Government has quietly launched an informal consultation on removing the obligation on the funds to be 100% funded. But this would simply defer the cost and mean future generations would pick up the bill.
Commenting, Liberal Democrat Shadow Work and Pensions Secretary, Steve Webb said:
“The Government has failed to grasp the nettle of 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.
“It’s totally unfair to burden people with these unexpected demands.
“Thanks to ministers sticking their heads in the sand many vulnerable people will suffer.”