UK - Local authorities are warning of cuts to public services to fend off mounting pension deficits.
The London Borough of Islington and East Riding Council in Yorkshire are preparing to use council reserves earmarked for public spending to help bridge scheme shortfalls.
The Islington council’s executive member for resources and chairman of the pensions committee, Arnie Gibbons (pictured), said the implications were severe.
“Our deficit is quite substantial,” said Gibbons. “We had a long period of contribution holidays way back and in 2003 we sold a large portfolio of property which gave us £50m against the deficit.
“However, our FRS17 still shows a deficit of £200m and the implications for council services is potentially severe.
“We have to make provisions in the region of £10m a year to go towards the deficit. We won’t raise tax so some services will have to be sacrificed.”
Surrey, Kent, Cheshire and Hampshire county councils and the London Borough of Croydon Council are all awaiting the results of this year’s actuarial evaluation before deciding whether they will be forced to do the same. Others, such as Waltham Forest Council, plan to increase council tax instead.
Most local authorities blame their shortfalls on the poor performance of the stock market and contribution breaks in the 1980s when their schemes reported a surplus.
A government consultation to be held later this year is to question employee contribution rates, which are currently held by law at 6%, despite employer contributions recently rising to as much as 20% in Kent.
Mercer Human Resource Consulting senior consultant Chris Hull said:
“Evaluations going on this year will show that scheme funding has dropped since the last report in 2001.
“Given that most of these schemes have equity-based investment strategies, funding levels can be expected to be down by around 15-20%.
“In the long-term, these levels should recover so employer contributions can be contained. The shortfalls need to be addressed but it’s a long-term game for these schemes.”
Daniel J. Graña of Putnam investigates how US's trade war with China will affect emerging market equities
Aviva Investors explains the growth and protection benefits investors gain from real assets
Royal London has announced that group chief executive Phil Loney has decided to stand down by the end of 2019.
Crashing out of the European Union without a deal could cause a 37% increase in the aggregate buyout deficit for defined benefit (DB) schemes, says Cardano.