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Wednesday, June 1, 2011

The gold-plated council pensions funded by you: For the first time the taxpayer bears brunt of premium costs

By Steve Doughty

Taxpayers have taken over the burden of paying town hall workers’ gold-plated pensions, figures revealed yesterday.

For the first time, more than half the cost of premium pensions for council staff is coming from the public purse.

It means local government managers and union bosses can no longer make the claim that council staff themselves pay most of the bill for their pensions.

Tax and council tax payers, who are often hard pressed to fund their own retirements, are now paying not only for the salaries of town hall workers, but also the bulk of their generous pensions and ‘golden goodbye’ lump sums.

The Department for Communities and Local Government figures show how much local councils paid into the Local Government Pension Fund in ‘employer contributions’ to ensure it meets its liabilities.

The employer contributions are paid on top of employee contributions and the fund’s own investment profits.

In 2009-10 the employer contribution paid by councils went up by £359million – a rise of 6.6 per cent, well ahead of inflation – to reach £5.759billion.

The figure is equivalent to well over a quarter of all council tax payments and amounts to 51 per cent of the £11.163bn cost of town hall pensions.

The taxpayer contribution is nearly four times higher than it was in 1997, while over the same period the contributions made by workers out of their pay packets have barely doubled.

Ten years ago the pension fund’s investments paid more than taxpayers were expected to chip in. Now they meet less than a quarter of the bill.

Council workers’ pensions are guaranteed against their final salary, and many still cling to agreements which allow them to retire in their mid-50s on a full pension.

Yesterday’s figures show that many are also taking advantage of rules agreed four years ago as part of an effort to negotiate an end to early retirement deals.

These allow a high proportion of council workers to claim tax-free lump sums when they leave.

Last year more than £1.45bn was paid out of the pension fund in lump sums – an increase of nearly 400 per cent in ten years.

The shift of the burden of council pensions onto the taxpayer means some people are paying far more to support the retirement of local government staff than they can afford to pay into their own pension funds.

The average home in England contributed £313 to top up the pensions of town hall workers in 2009-10.

With the average worker paying £90 into a pension every month, or £1,080 a year, the £313 figure means that subsidising the pensions of council workers swallows up almost a third of what workers put by for their own retirement.

The figures brought fresh complaints over town hall spending from pressure groups.

Christine Melsom of council tax protest group Is It Fair? said: ‘I hope the Government will carry out its promises of doing something about this.

‘It is very wrong that people are required to supply pensions like these to the detriment of their own living conditions.’

Charlotte Linacre, of the TaxPayers’ Alliance, said: ‘The cost to the taxpayer of funding public sector pensions is rising at a scary rate.

‘It isn’t fair on taxpayers that have to save for their own retirement to be propping up this unaffordable pension black hole.

‘Reform is urgently needed to reassess what is reasonable.’

A review of state pensions by former Labour minister Lord Hutton has found that state workers should pay higher contributions, work for longer, and accept lower pensions based on their average lifetime salary rather than their final salary.

But the councils’ umbrella body, the Local Government Association, has told Chancellor George Osborne that making town hall staff pay more towards their pensions may lead to ‘a significant worsening in industrial relations’.



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