The first shots of 2010 have been fired in the war against the LGPS. The Liberal Democrats are the first to start shouting about the hole in LGPS funding. The pension deficit for local councils in England and Wales could hit £60bn this year, Liberal Democrats have said. http://news.bbc.co.uk/1/hi/uk/8460542.stm
Pension's spokesman Steve Webb said figures he had obtained suggested the deficit might have doubled since it was valued at £27bn in 2007. Well Mr Webb, publish them if you have them, because the calculations are not due to 31 March 2010 so this is just Lib Dem electioneering with our money.
Just to put you in the picture, every three years pension funds have to estimate how much their pension costs are against their incomes. This is called a valuation. The LGPS triennial valuation takes place this March, every fund has to do this, it will surely show an increased hole or deficit, why will this be?
A pension fund valuation is not a science - it's a set of assumptions coupled with some adding and subtraction. On the negative side, we have pension benefits to be paid, how long they will be paid for, (how long are we going to live for), wage costs and inflation, on the plus side we have the asset values and the likely returns from those assets.
So you can see changes in asset prices, i.e. the stock market, will have a big impact on how much of a deficit or surplus a pension fund can have.
So the recent recession caused by the banks issuing vast amounts of cheap money and inflating asset values, the price of property and shares, will be one of the main reasons the Tories and Liberals will call for the LGPS to be closed.
Asset prices have plummeted like the proverbial stone, pension funds assets are mainly, company shares, government and company bonds and property, (offices, hotels, retail parks). Bankers, Tories and others will say that workers are living too long now, that we can't afford to pay a pension if you are going to live to 80. But the real answer is of course that the economy must be run in the interests of the owners of companies, and that is the millions of workers around the world who save in pension funds, and not the managers and bankers.
Finally the LGPS has been run poorly, without member representation and its fund management costs are far too high, it does need reforming but not in the interests of politicians or bankers, but in our interests. Saving the LGPS and all other public sector pension funds is one of our biggest, if not the greatest challenge we face.
