£47 billion pension crisis could hit council tax
Local government pensions are facing a crisis - having built up a black hole of £47 billion. A report from the Centre for Policy Studies has highlighted this incredible shortfall - which is up £10 billion in four years. It says that for every £100 that should be sitting in pension funds ready to pay retirees: £21 is missing. And taxpayers could end up footing the bill.
The local government schemes provide pensions for some 1.4 million retired councillors and council employees. They are a vital part of a sixth of all pension incomes in the UK, and they are under threat.
They were dubbed by the report as 'Ponzi schemes in the making', because in many cases, the amount being paid in each year by workers isn't enough to pay out to pensioners in the same year. It means that the schemes are running on empty, and that the money kept aside to cover any shortfall is being rapidly eroded.
The situation is only going to get worse, as the number of local government employees is shrinking, and retired council employees are living longer. It means that over time the amount being paid out will grow, and the cash paid in will shrink.
It highlighted the boroughs of Brent, Waltham Forest, Havering, Croydon, Sutton, Clwyd and Worcestershire as being particularly poorly funded.
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Taxpayers foot the bill
The report waned that in the final analysis it will be up to taxpayers to bail the schemes out through higher council tax. However, it added that because council taxpayers with little or no pension of their own would be bailing out guaranteed pensions for council employees, this was "unlikely to be politically implementable". The more likely alternative is that the Treasury will underwrite the schemes, and taxpayers will bail them out in a far less direct way.
The CPS is keen for this not to happen. Instead it called for immediate reform to make the schemes more efficient - including merging all the pensions into one main fund, and raising the amount that each employee contributes to their pension.
The question is whether the government will take decisive action on this, or whether the problem will be left to fester until it gets entirely out of hand and taxpayers are called in yet again to foot the bill.
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