Nearly a quarter of all council tax elevated is being made use of to money personnel pension plans, brand-new numbers recommend.
An information evaluation throughout greater than 250 councils has actually discovered that virtually £7 billion was funnelled right into the Local Government Pension Scheme (LGPS) in 2014, simply except ₤ 1 in every ₤ 4 elevated in council tax obligation.
The numbers, released by The Times, have actually been called “extremely difficult to justify”.
The evaluation consists of ₤ 141.7 million paid right into pension plan pots by Birmingham City council, which successfully declared bankruptcy last year.
The Times based its evaluation on Freedom of Information demands sent out to greater than 300 councils throughout Britain, of which 254 reacted.
Those authorities apparently paid ₤ 5 billion right into their personnel pension plans in 2014, equal to a standard23.5 per cent of their council tax proceeds For some councils, the percentage was majority.
From these numbers, The Times theorized that the complete amount paid right into pension plans throughout all councils was more than £6.7 billion.
Council employees are instantly registered right into the LGPS, among one of the most important pension plans in the nation.
It is a specified advantage pension plan system, which assures an inflation-linked revenue permanently in retired life.
This sort of pension plan is so pricey to preserve that companies have actually phased them out of the economic sector.
Today, many economic sector employees conserve right into “defined contribution” pension plan systems, which spend their financial savings in supplies and bonds.
Unlike specified advantage systems, it is private workers’ obligation to turn their savings into an income in retired life.
Tom McPhail, a pension plans professional at monetary consultant Lang Cat, informed The Times that the “generous pensions” provided by councils might no more be validated to taxpayers.
“In the context of today’s economy and the decline of private sector pensions, it is extremely difficult to justify the continued generosity of the local authority scheme,” he claimed.
“If you rewind 30 years, it would have been relatively unexceptional and similar to what was being offered by FTSE 100 companies.
“The difference is private sector employers became at first unwilling and then unable to meet the cost of such generous pensions.
“Yet the public sector and in this case, the local authority scheme, has just sailed blithely on regardless, relying on the captive funding of local authority taxpayers to subsidise their pensions.”
He asked for the system to be changed, claiming: “We can no longer justify to our citizens, to our ratepayers, to our council-tax payers, draining them of this money to support these pension schemes. The moral case for it is very straightforward.”
‘Retention difficulties’
A representative for the Local Government Association, which stands for councils, claimed: “Local government workers provide hundreds of essential services every day. However, more than nine in ten councils are experiencing staff recruitment and retention difficulties.
“The pension scheme can help encourage people to develop a career in local government. With pay often lower in local government than comparable private sector roles, the scheme can mitigate that while helping public sector workers avoid needing welfare benefits in retirement.”
