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Barnett Waddingham comments on the reported £100bn LGPS “black hole"

Commenting on reports that there is a £100bn "black hole" in the Local Government Pension Scheme ("LGPS") in England and Wales which will require an extra £4bn a year in contributions to plug the gap, Graeme Muir, Partner at Barnett Waddingham said: 

"Big scary numbers always make a good headline - usually at the expense of accuracy.

"The figure of £100bn is the summation of the deficits disclosed in Council accounts under the accounting standard FRS17.  This accounting standard has no bearing on the levels of employer contributions paid into Funds to meet future pension payments.  The funding deficit will in the main be funded via existing levels of employer contributions.

"Contrary to the author's claims, the liabilities of LGPS Pension Funds have not increased by 41%. If however you discount these liabilities with corporate bond yields then you might get a number that is about 41% more than it was 3 years ago.

"The author however does not explain what relevance corporate bond yields have in determining the amount required to meet public sector pension liabilities backed by over £150bn of assets."

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