The Taxpayers’ Alliance has just published its report on UK Local Government Pension Schemes - showing cause for concern in the extent to which significant deficits exist between the assets and liabilities of many of the schemes.
Not one of the UK’s 101 schemes is without a deficit and the overall total deficit over all UK local authorities is £54 billion.
As the Taxpayers’ Alliance report says: ‘Ideally, a pension fund would have assets that are as close to 100% of
liabilities as possible. Many schemes abroad have more assets than liabilities.’
It argues that with the scale of the deficits obtaining, ‘Local Government Pension Schemes (LGPS) have become
unaffordable and as a result unsustainable, and need urgent reform.’
Taxpayers are ultimately liable for this deficit. Because of this, in the series of useful tables the Taxpayers’ Alliance has produced to show the respective positions of the UK local government pension schemes, it includes the share per head of population of each area’s deficit.
The figures – all for 2010-11 – show that:
- 14 local authorities had deficits over £500 million in 2010-11, and 165 local authorities had deficits in excess of £100 million;
- Across all councils in 2010-11, the average ratio of assets to liabilities was 70%.
- The London Borough of Brent had, at 42%, the lowest share of assets to liabilities in the UK.
- The next lowest ratio was Merthyr Tydfil Council on 50%.
- 26 local authorities had pension assets to liabilities ratios below 60%.
The report quotes Michael Johnson, ‘a pensions expert and a research fellow of the Centre for Policy Studies’, who, with several other signatories, wrote a letter to the Financial Times in February 2012, drawing attention to the fact that, as they described it: ‘Several (Ed: LGPS) are now so underfunded that they are beyond the point of no return. Now having to consume their assets to meet pensions in payment, such funds are in a death spiral. The inability of the LGPS to control costs is masked by the ineffective governance tripartite of employers, central and local government.’
In this context of widespread concern, Argyll and Bute Council’s pension scheme has, at 94%, the fourth best ration of assets to liabilities across the UK.
It is headed by Chichester, with a deficit relatively small enough to be rounded up to a 100% ratio. Horsham in West Sussex is in second place with a ratio of 97%; and Wandsworth in London third with a ration of 96%.
Then comes Argyll and Bute with 94%; followed by West Dunbartonshire in fifth with 92%; and by Orkney and East Renfrewshire jointly in sixth place with 90%.
Glasgow City Council, with a 79% assets to liabilities ratio had the largest deficit in Scotland, with £625 million – £1,054 per head for Glasgow’s population of 592,820.
Scotland’s highest deficit per head of the local population is Dundee City Council at £1,565 (Argyll and Bute’s is £294 per head), with an assets to liabilities ration of 76%.
The literal size of the deficits are, of course, relative to overall population size and to the historic average proportion within that who are local authority employees and therefore contributors to the scheme.
Overall, this is clearly an excellent performance by Argyll and Bute Council’s pension scheme – and it is very good to see the name of Argyll up there as fourth best in the UK.
The Taxpayers Alliance media statement, with the tabular figures quoted above, along with other headline results of the report, is here: pensiondeficits2012
We are grateful to a reader for drawing this report to our attention.