COUNCIL TAX BILLS COULD LEAP TO FUND £54BN PENSION DEFICIT 'TICKING TIME-BOMB'

FIRST PUBLISHED BY: THIS IS MONEY

EXPERTS WARN COUNCIL BILLS WILL HAVE TO RISE SHARPLY IN THE FUTURE TO PAY FOR PENSIONS PAID TO COUNCIL WORKERS, FROM BIN MEN TO TOWN HALL STAFF. 

Britain is sitting on ‘a ticking time bomb’ created by the generous pensions enjoyed by council workers, the report warns today. The shocking analysis reveals councils across the UK have a pensions deficit of £54billion – amid warnings it could get even bigger. Warning: Council Tax bills will have to rise sharply to pay for council workers' pensions, experts believe. The equivalent of around £1 in every £5 of Council Tax is already spent on local authorities’ contributions to their workers’ pension scheme, according to the report by campaign group the TaxPayers’ Alliance.

The average pension paid to a council worker is around £4,200 a year, which covers all council workers, many of whom are on very low pay. But more than 2,700 scoop pensions worth at least £37,000 a year and more than 35,000 get at least £17,000 a year, according to official figures. By comparison, most private sector workers do not have a pension – and it is worth only £1,400 a year to those who do.

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IMF warns Britain may need to raise retirement age faster to avoid a debt spiral. Pensioners who saved diligently for years to see payout income slashed by up to 60% Matthew Sinclair, a director of the TaxPayers’ Alliance, said: ‘The deficit remains a ticking time bomb that is being left for future generations of taxpayers to deal with. ‘With an ageing population and a crisis in public finance, generous final salary schemes, like the Local Government Pension Scheme, are inflexible and too expensive and need urgent reform.’ The report, based on official council figures, says the local government pension scheme has assets of £132billion. But the scheme has made pension promises, known as liabilities, of £186billion to its members – leaving the £54billion deficit, according to the 2010/11 figures.

The biggest culprit is Birmingham City Council, with a deficit of £1.33billion – equal to nearly £1,300 for every resident. Overall, the report says there are 165 local authorities with a deficit of more than £100million. Dr Ros Altmann, director general of Saga and a leading pension expert, said: ‘Taxpayers underwrite the deficit. If it does not come down, they will foot the bill. Future taxpayers – our children and our grandchildren – will be on the hook.’ Tom McPhail, head of pensions research at financial advisers Hargreaves Lansdown, said: ‘Local authorities are going to come under pressure to raise Council Tax to fund these pensions. ‘They are going to have to go to taxpayers, who do not have good pensions of their own, to meet their very generous pension promises. That is not going to go down well with people.’

The average Band D Council Tax bill in England is currently £1,444, one of the biggest monthly costs facing most families after their mortgage or rent and food bill. Bob Neill, the minister for local government, said: ‘These pension bills are costing over £300 a year to every family and pensioner paying Council Tax, diverting funds from emptying bins, cleaning the streets and keeping Council Tax down. ‘Hard-pressed taxpayers simply cannot afford to foot an ever-growing bill.’

Local government workers currently get a final salary scheme, retire at 65 and contribute only between 5.5 per cent and 7.5 per cent of their salary. The Government is currently negotiating changes with unions, including a switch to a career average pension and to link retirement age to the rising State pension age. Sir Steve Bullock, chairman of the Local Government Association’s workforce board, said: ‘Presenting a one-day snapshot is a spurious way of gauging the viability of a pension scheme and this year-old figure has no relevance to the actual cost of local government pensions. ‘Councils have taken steps to ensure the schemes, which are significantly funded by contributions from employees, are affordable for taxpayers, fair to workers and viable in the long-term.’

READ WHAT: ERIC PICKLES ‘SECRETARY OF STATE’ SAYS ABOUT OVER-CHARGED COUNCIL TAX. 

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