Page last updated at 03:35 GMT, Friday, 15 January 2010

Council pension deficit 'set to double to 60bn'

People are living longer, affecting pension schemes

The pension deficit for local councils in England and Wales could hit £60bn this year, Liberal Democrats have said.

Pensions spokesman Steve Webb said figures he had obtained suggested the deficit might have doubled since it was valued at £27bn in 2007.

It comes as the government considers changes to pension funding which may include higher staff contributions.

Like most pension providers, councils have been hit hard by poor investment returns and longer lifespans.

Higher council tax

Using the Freedom of Information Act, Mr Webb obtained internal estimates from some councils, which showed:

  • 83 of 87 local authorities were in deficit at their last official valuation in 2007 before the stock market slump and recession.
  • Since then, 10% of funds have conducted their own valuations which showed deficits have grown by more than 280% on average.

The Lib Dems said if this was replicated across all pension funds, the next valuation - due in March - would uncover a deficit of more than £60bn.

Mr Webb said if the deficit has increased, current regulations would force councils to plug the gap, by either cutting services or raising council tax.

Pensions consultant John Ralfe believes the deficit could be even higher than £60bn, which would result in higher employer contributions.

The government has produced a consultation document which proposes relaxing the rules on reducing deficits and suggests raising contributions from staff earning more than £30,000 a year.

A government spokesman said ministers would announce their proposals shortly.

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