Councils instructed: Use pension riches to plug funding gaps
Town halls are being urged to make use of an enormous pensions windfall to ease the disaster in native authority funding.
There was no additional money for councils within the Autumn Statement, leaving them dealing with actual time period cuts in native companies over the following yr.
Nottingham just lately turned the most recent native authority to declare itself bankrupt amid forecasts that almost a fifth of councils may quickly run out of cash.
But consultants say permitting employers to chop their funds into the Local Government Pension Scheme – accountable for the nest eggs of six million council staff in England and Wales – may present a short-term answer in the event that they spend the money on companies as an alternative.
The LGPS has £364 billion in belongings and invests largely in shares. In a valuation final yr it registered a £22 billion surplus.
Crisis: Nottingham just lately turned the most recent native authority to declare itself bankrupt amid forecasts that almost a fifth of councils may quickly run out of cash
The sharp rise in rates of interest since means the present worth of its liabilities – the promise to pay future pensions – has nosedived, so the scheme has a a lot larger surplus.
‘Making a few of this out there by way of lowered employer contributions will make an unlimited distinction to native authorities and their communities,’ stated Steve Simkins of pensions consultants Isio.
English councils face a £4 billion funding hole within the subsequent two years.
Simkins stated this could possibly be plugged if corporations scale back the annual quantity they pay into the LGPS from £7 billion to £5 billion.
The LGPS stated it’s ‘actively contemplating’ the windfall.