Hampshire County Council has revealed that the£2.4bn fund it administers may lose£7.1m as a result of the scandal.
Meanwhile, the Merseyside Pension Fund announced that the value of its£3.4bn fund could fall by “approximately£2m”.
Both councils’ plight has been highlighted due to their status as major shareholders in Bramdean Alternatives Ltd, which is managed by Nicola Horlick and had almost 10% of its funds placed with Madoff.
Tom McPhail, head of pensions at Hargreaves Lansdown, warned that it could take weeks for the full impact to emerge.
“Schemes up and down the country could hold investments that were either directly or indirectly linked,” he said.
“If Nicola didn’t see this coming, what chance would the trustees of a local authority pension scheme have had?”
Ian Greenwood (Lab), who chairs the Local Authority Pension Fund Forum, said he was not aware of any other big losses in the sector related to Madoff and that pension funds were always diversified.
He added that other affected councils were likely to be exposed via a “fund of funds” rather than direct investment.