Ros Altmann: Councils should consider LGPS contribution holidays to fund services

The former pensions minister said the LGPS for England and Wales was estimated at March 2025 to have a funding level of nearly 150% - with a surplus of around £150bn on a low-risk basis.

She said that, as council pension funds prepare to set employer contribution rates for the next three years, there was a "serious risk" they will pay far more than necessary into their schemes, thus depriving local services of much needed funding.

Altmann said LGPS surpluses could allow for contribution holidays – a move that could "divert billions to local needs".

She said councils are estimated to spend around £7bn a year on employer contributions to the LGPS – noting that pausing these contributions could help bridge the funding gaps that nearly all councils are facing and constitute "a much better use of local government resources".

Altmann explained: "Since all local authority pension schemes have significant surpluses, and about a quarter of council tax goes into pension contributions, encouraging councils to consider employer contribution holidays would help them meet local spending needs, take pressure off never-ending council tax rises.

"This can help boost regional growth, as well as helping reduce the fiscal deficit, as council calls for more central government funding and pension reliefs will fall."

Altmann said that, based on freedom of information responses from 254 of 317 councils, councils spent about 23.5% of council tax revenue on pensions.

But she said there were some large variations across councils, with 14 councils – including Basingstoke & Deane (106%), Orkney (76%) and Cheltenham (75%) – allocating over 50% of their council tax revenue to pensions.

Altmann added a further 60 councils were found to devote at least 20% of council tax revenue to pensions, with 24 of those spending over 33%.