Critics attack 'spurious' report on local government pensions deficit
UK - Critics have dismissed a report on a "gaping" £50bn (€60bn) pensions deficit in UK local authority pension funds as "flawed" and "spurious", arguing that the outdated funding figure was no longer relevant.
Published by the TaxPayers' Alliance, a conservative lobbying group, the report warned that underfunding in local authority funds placed a "heavy burden" on taxpayers, with the organisation's director Matthew Sinclair declaring it a "ticking time bomb" for future generations.
Barnett Waddingham partner Graeme Muir, however, dismissed the claims as "flawed", pointing to planned reforms within the LGPS system that were set to reduce costs in future.
He added that the £54bn deficit calculations only reflected the state of funding if all assets were invested in fixed income.
"Thus funding deficits, which do reflect actual investment strategies, will be lower - maybe by between a third and a half lower - and the deficits that actually matter are being funded via current levels of contributions," he said.
"Funds are a bit behind schedule in terms of their funding journey for many different and historical reasons but have been [making up time] by going a little bit faster to catch up."
TPA alluded to one of the historical reasons, acknowledging that the deficit figures had fallen by more than a third year-on-year at the end of March 2011 after a "particularly bad year" in 2009-10.
Sir Steve Bullock, chair of the Local Government Association's workforce board, highlighted the decline in his criticism of the report.
"The fact the nominal deficit fell by £37bn in just a year shows we are getting it right and that the supposed ticking time bomb is already being defused," he 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."
Bullock further alluded to the reforms mentioned by Muir, saying steps had been taken to ensure the schemes were "affordable for taxpayers, fair to workers and viable in the long term".
The report - 'Council pensions: The £54 billion black hole' - suggested a number of options to improve the health of the system, including increased employee contributions and a shift to defined contribution, echoing suggestions by the Centre for Policy Studies.