Council pension fund deficit tops £1 billion

5.54.17pm GMT Fri 22nd Jan 2010

The Avon Pension Fund faces a deficit of more than £1 billion - forcing up council tax bills for residents in North Somerset.

The Avon Pension Fund, which administers pensions for dozens of authorities including North Somerset Council, Weston-super-Mare Town Council and Weston College, was in deficit at the time of the last fund valuation in 2007 by £446.7 million.

The latest estimate shows that, as a result of the slump in the investment market, the deficit between the fund's assets and liabilities has now risen to just over £1 billion.

Under current pension fund rules, employees pay a contribution rate of between 5.5% and 7.5% of their salary. North Somerset council tax payers currently pay an employers rate of 17.9%.

However, with the growing deficit this taxpayers' contribution rate could rise to as much as 25% over the next few years - adding more than £4 million in new costs to North Somerset Council's budget.

Mike Bell, the Liberal Democrat Parliamentary Candidate for Weston-super-Mare, and a former North Somerset Council finance executive member, has renewed calls for urgent reform to the pension system.

He said: "With the pension deficit rocketing to more than £1 billion, council tax payers will be very concerned that tax bills will have to rise to make up the shortfall.

"The Government has failed to grasp the nettle of local government pensions funding. A failure to set aside enough money and run the scheme responsibly means local residents are faced with cuts to vital services and council tax hikes, hitting pensioners especially hard.

"The system has to be urgently reformed and there are various options including shifting to an average salary basis and raising employee contributions.

"Most local government employees are on relatively low incomes and will get pretty paltry pensions. But the local government fat cats on big salaries and gold-plated pensions need to be tackled.

"The Government cannot go on burying heads in the sand and hoping that this issue will go away."