Pension scheme deficit hits GBP100 billion

Mon, 23 Mar 2009

According to John Ralfe, the independent pension consultant, pension schemes run by local governments are in £100 billion deficits, over twice the official number. At this stage, the FTSE 100 would have to double to redeem the giant shortfall.

Local government are seeing tax revenues fall and the collapse of stock markets has wiped the value of pension schemes out. A drop in bond yields caused by quantitative easing only exacerbates the problem.

Known as the LGPS – local government pension scheme, the scheme covers 81 local authorities and 3.7 million former and current employees.

Ralfe reportedly commented: "Neither individual local authorities, nor central Government, recognise the LGPS deficit and thus have no plans to address it, other than keeping their fingers crossed and hoping the massive equity bet will pay off. Meanwhile, the deficit will have to be paid by future taxpayers. Councils cannot be run efficiently if a major part of their costs are conveniently understated."
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