Claims that the local government pension deficit in England has more than doubled to £100bn since the last valuation have been disputed.
Local Government Pension Scheme (LGPS) managers, financial experts and unions have all rejected the figures from independent consultant John Ralfe, although communities secretary Eric Pickles spoke out to describe public sector pensions as “unsustainable”.
Mr Ralfe’s calculations suggest the LGPS deficit has increased from £42bn three years ago to £100bn today because asset values had risen by 8%, liabilities had increased by 41% and, crucially, because of the accounting assumptions used by the LGPS.
He said the official LGPS valuation, due out early next year, would show a much lower figure because valuers do not use the FRS17 accounting standard used by private companies to value the liabilities of their pension schemes in company accounts.
The effect of using FRS17 is that it inflates the stock of assets which schemes need to hold to pay their pensioners in the future and thus increases their deficits.
Bob Summers, head of the Chartered Institute of Public Finance and Accountancy’s pension panel, said the tri-annual valuations would be a much better guide to the deficit because they took a long-term view.
“There is the potential for some highly misleading information,” he said.
Mike Taylor, chief executive of the LGPS’ London Pension Fund Authority, said the FRS17 measure “provides us with a snapshot view of LGPS liabilities that stretch out literally decades into the future, based on today’s interest rates”. (See comment).
GMB union’s public services national secretary, Brian Strutton, described the claims as “ill-informed and partisan speculation” and warned that “Mr Ralfe, who has made these claims today, recycles this story every six months”.
However, communities secretary Eric Pickles stated that the “massive and unsustainable cost of state sector pensions” and quoting a disputed figure that “town hall pensions are now costing over £300 a year to every household paying council tax”.