Newspaper article The Evening Standard (London, England)

Black Hole in London Councils' Pension Funds Grows to [Pounds Sterling]10bn

Newspaper article The Evening Standard (London, England)

Black Hole in London Councils' Pension Funds Grows to [Pounds Sterling]10bn

Article excerpt

Byline: Jonathan Prynn Consumer Business Editor

THE pension black hole at the heart of London's government has risen by a third to top [pounds sterling]10 billion, a study has found.

The combined deficit in the pension funds of the 32 boroughs, the City of London Corporation, the Greater London Authority and Transport for London climbed from [pounds sterling]7.63 billion to [pounds sterling]10.23 billion in the 12 months to the end of March.

The biggest single shortfall was at Transport for London, where it rose by almost 50 per cent to [pounds sterling]1.15 billion.

The biggest council deficit was at Brent with a shortfall approaching half a billion pounds, according to the research carried out by consultant Anthony Kimber on behalf of the Standard. Experts said councils are failing to put enough money aside to pay the guaranteed retirement benefit of tens of thousands of former workers -- from cleaners to chief executives -- in future years.

Independent pension consultant John Ralfe said: "If you look at the pensions promises made to employees today you have to ask, 'How much will they cost?' and 'Is there enough money going in now to pay for them?' No there isn't.

"If it costs 30 per cent of salary to fund a local government pension, exactly who is writing the cheque for 30 per cent? Show me the cheque."

The black hole has grown since the Standard first exposed the shortfall last March, in part because of the performance of the stock market. About threequarters of local authority pension fund assets are invested in shares, which fell steeply in value in the run-up to the financial year end on 31 March, when the valuations were made.

The deficits will be smaller now because of the dramatic rise in the FTSE 100. But, with life expectancy continuing to rise, experts feel there is little chance of the gap closing. …

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