This is
what the GMB say on the matter
Local Government Pensions Healthy
Tuesday 12th July 2011
LATEST LOCAL GOVERNMENT PENSION SCHEME ACTUARIAL VALUATIONS SHOW OVERALL THE SCHEME IS SUSTAINABLE WITH £145BN IN ASSETS
Providing participation levels do not fall the overall picture of the LGPS from the 2010 actuarial valuations shows there is enough funds to pay all pensions for the next twenty years GMB study shows
The latest valuation results for the Local Government Pension Funds (LGPS) in England, Wales and Northern Ireland for 2010 show that overall the funds have £145bn in assets and a funding level above 80%. The actuarial deficit is estimated at £38 billion. The average ongoing employer contribution is 13.9% while the average employee contribution is 6.5%.
in other words, the healthy surplus is more like a 20% deficit, and the only way the actuaries can say it's sustainable is by relying on future generations of Council employees to pay more - the typical pattern of intergenerational injustice we see so much of. An
independent pensions expert was reported in Dec 2010 as saying:
John Ralfe wrote:to fill the £80bn hold over 25 years "would require an increase in council contributions of £4bn a year, increased in line with inflation, a 70% increase in current contributions of £5.8bn".
Later
Mr Ralfe says that the Local Government Pension Scheme will show a much smaller official deficit when it publishes an actuarial valuation in the spring, because it will not be using the FRS17 valuation method imposed on the private sector.
Under this actuarial valuation, local authorities will be discounting their future pension payments using a much higher rate than the FRS17 AA corporate bond yield, because they will argue that the value of the shares held by the scheme is likely to rise faster than is implied by that corporate bond yield.
This kind of discretion in the assessment of liabilities is not allowed to private-sector pension schemes. Mr Ralfe argues that the government is in effect taking a massive gamble with the public finances in allowing local authorities to employ a less conservative approach than the private sector.
In other words, some slightly dodgy accounting (which the private sector cannot get away with), based on assuming that over long periods of time stock markets do indeed provide very good returns. So, anyone who claims that the LGPS is well funded should at least be doing everything they can to increase returns to stock market investors, both in the UK and worldwide.
In fact cockneyrebel is right to wonder whether these very good returns have ended, as a glance on the business pages will reveal. The numbers to look for are the real yields on long index linked gilts. These tell you the
long run returns that investors who want to factor out the risk of inflation are prepared to settle for.
Astonishingly, these are negative. In other words, the balance of views among investors is that the economy will stagnate for decades. Of course, it might not be so bad, but is it fair for LGPS beneficiaries to bet on it with the money of other taxpayers? Not so different, when you think about it, as bankers betting on markets, and having the tax payer bail
them out when it all goes wrong.
