Council pensions in deficit after ill-health early retirements

Local council pension funds have huge deficits, mainly because large numbers of staff are taking early retirement on the grounds of ill health, it has emerged.

London’s 33 local authorities have a combined deficit of £10bn. Many have seen their pension funds fall into the red as staff take early retirement on generous terms due to ill-health.

In the borough of Greenwich alone, close to half of all retirements were premature, based on ill health, an investigation by the Evening Standard found.

A spokesman for London Councils, a think-tank which promotes London’s local authorities, admitted that there were problems with pensions, but maintained that councils were in control.

“There has been an issue with early retirements in recent years, and that’s something councils are looking at,” he told Personnel Today.”But the implication that this will inevitably lead to service cuts or tax rises is incorrect.”

At Greenwich almost half the 484 retirements in the 2007-08 financial year were early because of ill health, redundancy or efficiency drives, the investigation found. A report into the Greenwich scheme from actuary firm Barnett Waddington said that “the costs of the early retirements were met via additional employers’ contributions”.

The boroughs of Newham and Croydon had the biggest combined shortfall, totalling nearly £840m, the pension deficit is higher than the councils’ combined annual spending on education and social services.

Yesterday, a pensions expert revealed that the total Local Government Pension Scheme deficit has soared to£100bn.

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