The Audit Commission says the Local Government Pension Scheme (LGPS), the largest one in the public sector, needs reform.
The LGPS is largest public sector pension scheme by membership. It has 1.7 million active members, 1.15 million members with deferred pensions, and 1.1 million receiving pensions.
Nearly three-quarters of its members are women, and nearly half work part-time.
The Audit Commission's research into LGPS highlights the difference in relationship to other public sector schemes. It is backed by local funds which take some of the pressure off the tax payer. But recently these investments have failed to deliver the anticipated returns and the funds currently cover only about three-quarters of the scheme's future liabilities.
The report looks at whether LGPS benefits are affordable in the long run. It acknowledges that recent reforms will address some of the underlying issues, but warns that these reforms alone will not guarantee long term sustainability.
Council tax levels
As Lord Hutton's review of public sector pensions gets under way, the Commission's paper Local Government Pensions in England
addresses a major financial issue for local government, affecting the cost of council services and influencing future council tax levels.
Pensions are a live issue for the public and private sector. The cost of providing council pensions is rising in absolute terms and as a proportion of the total pay bill. People are living longer in retirement, wage levels have increased, and benefits have improved over the years.
While there is no immediate crisis, says the Commission, the scheme needs further action to manage the growing mismatch between liabilities and the resources available to fund them.
The Audit Commission's chief executive, Eugene Sullivan, says: 'Media reports about generous public sector pensions distort the picture. We did this research to ensure that the debate was informed by facts, not perception. One of the key facts is the high proportion of part-time and low paid members in the LGPS. Around half of pensions in payment are below £3,000 a year.
"Nevertheless, local government employers already pay much more into the LGPS than employee members, and without corrective action the gap will widen. The scheme can't continue as it is. Unfunded liabilities are being deferred, and this is storing up problems for the future."
From Flip Chart Fairy Tales
From Bubb's Blog
From Whitehall Watch
