The pension fund black hole at London’s town halls has risen to an all-time high of almost £18 billion, according to analysis by the Standard.
The combined total of £17.98 billion for the 2018-19 financial year represents a near seven per cent rise on the previous 12 months and shows that efforts by councils to close their deficits have not yet reversed the trend.
The shortfall is the gap between the value of the assets in the pension funds — mostly shares — and the estimated value of the retirement incomes that will be paid out to current and future retired council workers for decades to come.
Over the past decade the deficit has almost doubled from £8.4 billion as life spans have increased while returns on investments have stagnated.
The situation has been exacerbated by legal rulings against the Government such as last year’s McCloud case, relating to the shift from final salary schemes to less generous pension arrangements based on average salaries. The Government said the ruling could add up to £4 billion a year to the cost of funding public sector pensions.
The biggest single deficit of London’s 32 local authorities is Brent council’s £925.7 million, according to latest accounts. Bromley has the smallest deficit with £59.1 million.
The shortfalls do not mean there is a danger of councils being unable to pay retirement benefits to pensioners in the immediate future. But they will force cash-strapped town halls to pay more into pension pots to ensure they are fully funded over the longer term. Together they have assets valued at £32.4 billion but liabilities estimated at £50.4 billion.
Independent pension expert John Ralfe said: “The new Conservative government cannot go on ignoring public sector pensions … The can has been kicked down the road long enough.”
A Brent council spokesman said the deficit had risen “due to people living longer … paying pensions that are more generous than those available to workers today, and recent court rulings”.
He said the council had “taken a number of actions to improve the funding situation” and expected the next formal valuation to show the deficit reducing.
