The pensions deficit has grown massively according to new research.
Pension debt has soared to new heights.
The Local Government Pension Scheme deficit in England may have doubled in size to £100 billion over the last three years if new research is to be believed.
A report conducted by independent pension consultant John Ralfe found that the shortfall could be as high as 7% of the UK’s annual economic output. Three years ago the deficit totalled just £42 billion highlighting how fast the debt has accumulated.
Mr Ralfe highlighted that the value of assets in the local government scheme has risen to £132 billion over the last three years, which is an increase of 8%. However, liabilities have surged by a massive 41% to a total of £232billion.
Experts have said that the figures revealed in the report are exaggerated and only offer a snapshot view of the pensions deficit due to the alternative accounting standard used by Mr Ralfe in his calculations.
Bob Summers, head of the Chartered Institute of Public Finance and Accountancy, said: “There is the potential for some very highly misleading information. What happens every three years – and we’re just in the process of that process being completed – is that an independently appointed actuary looks at each and every fund”.
He continued: “It is a fund backed by investments which means we can take a long-term view”.
Brian Strutton, the GMB’s national secretary for public services, said: “In effect Mr Ralfe is [taking] the equivalent of taking a snapshot of your personal finances part way through a mortgage. It looks like you’ve got an unaffordable debt but the reality is to look at the long term and whether you can meet that debt”.
However, the government did admit that the local government pension scheme was too expensive.
Communities Secretary, Eric Pickles said it costs each household paying council tax an annual figure of over £300 to pay for town hall pensions. He added that action needs to be taken to “reduce the massive and unsustainable cost of state sector pensions” to build a system that’s fairer to council workers and taxpayers.