UK - The London Borough of Croydon is increasing employer contributions to its pension scheme to nearly a quarter of staff salaries.
But the government claims it is “inaccurate and misleading” to refer to council scheme deficits.
Croydon is one of several local authorities considering raising council tax to help close its £254m shortfall. And 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 Croydon currently pays an employer contribution of 16.5%, but has agreed to a four percentage point increase in 2005-06 and a further 2.5 percentage point rise in 2007.
Croydon has included an estimated £4m in the 2005-06 budget forecast to allow for the increase in contributions.
A spokesman said the scheme was in a similar position to many others. He said: “The major reduction in the stock market valuation together with greater life expectancy of most pensioners, has meant many pension funds have deficits.”
But the Office of the Deputy Prime Minister, which has ultimate responsibility for the Local Government Pension Scheme, says any reference to deficits is inaccurate and misleading.
It points out that, unlike a private sector scheme, there is no immediate need for a local authority to deal with any shortfalls since the liabilities do not have to be met at once.
A spokesman said: “Their long-term statutory nature means they can take a much longer-term view over pension liabilities and manage short-term market fluctuations.”
He added that the ODPM has been working with local government for more than a year to ensure the ongoing sustainability and affordability of the scheme.
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