Forum Topic

Is our real problem Ealing's pension deficit?

Watching the rugby at the weekend I got into conversation with another group of people who were in the same bar and it turned into a very convivial afternoon. Given the result we wanted to talk about something more cheery so natuarally the subject switched to pensions rather than the match.The chap I was talking to seemed to know his stuff and told me that Ealing Council in particular had a major problem with their fund which was running a very substantial deficit. He said most local authorities had an issue because fewer people were joining council schemes because of outsourcing and head count reduction and more and more people were retiring and living longer but Ealing's short fall was more than most. He also said that at some point soon, just like many companies the borough will have to start covering the deficit which could be in the region of half a billion. There is no prospect that scheme income will make it self funding because, although head count has reduced, average salaries have increased significantly and generous early retirement packages remain in place. He said that Ealing like many other councils have reduced costs by persuading people to take retirement. This is actually more expensive but pushes when it needs to be paid for out into the future. His estimate was that by the end of this decade local taxes would need to double to make sure the pension fund was adequately funded.I really don't know enough about pensions and the way they work to know if this is alarmist nonesense or a timely warning. I have heard people say similar things before. It there anyone with expertise in these matters who could comment?

Andy Jones ● 2269d9 Comments

That's interesting but I think you have to put it in context of what was happening in the private sector at the same time. Many people were paid in part by discretionary bonuses which dramatically reduced or disappeared after the crash. Salary increases weren't just capped but in many cases pay was reduced.Obviously there will be huge differences from industry to industry but in my line of work there has been a shift to people moving into the public sector and pensions have been a significant incentive.

Andy Jones ● 2253d

I can't speak for Ealing Council, but at the risk of playing some sort of devil's advocate: While I worked in the public sector for only 12 years, and only at an administrative level, I can assure you that the effect on the civil service, when I joined just in time for the financial crash, was immediate.  It appeared that the profligacy of such institutions as the Youth Justice Board (where I started) was solely responsible for the mess we were in -- all those meeting room biscuits and all that maternity leave!  - and an across-the-board 1% pay rise cap was put in place that was only lifted in Sept 2017.  Travel - no matter how far or how much work needed to be done on the way - was limited to economy class and/or coach, even if a cheaper 1st class ticket could be found (it was possible) as we not only had to be careful, but be SEEN to be being careful.  Organising conferences became tricky, as international experts would be invited to take part but only offered economy class flights and a budget hotel once they got here, or asked to pay their own way. We were never, under absolutely no circumstances, allowed to be seen to be having any sort of fun whatsoever.  So, while banks and financial institutions still had their bonuses, raises, staff jollies and Xmas parties, any team "bonding" session would involve hours of PowerPoint presentations, and we had to covertly call any sort of Christmas do an opportunity for "networking" and there was always more PowerPoint presentations of some sort along the way, just what you needed as you sat in the freezing function room somewhere in Didcot.

Adam Kimmel ● 2265d

100% agree with you Tania.  Public sector pensions all need an overhaul.  Unfortunately I don’t even think a strong Tory government would be brave enough to take that on.

Richard Foster ● 2266d

Private sector pay adjusted down after the financial crisis public sector pay never did plus defined benefit pensions have largely disappeared from the private sector.The problem is that the net contribution to tax income of someone who is a public sector employee is zero so the private sector workers are the ones that will have to cover the cost of their pensions. That shouldn't be a problem unless we make any major change to the way our economy is run which lowers the rate of economic growth.In Ealing it looks as though the problem is coming home to roost a bit earlier than elsewhere but it is ultimately a national issue.

Andy Jones ● 2266d

I don't get public sector pensions.In the olden days the jobs within the sector were badly paid and the reason you had a great pension was to make up for the fact you worked for years earning less than you could in the private sector. Nowadays the public sector earn the same, if not more, than the private sector, have more or less job security even if they're useless (see Ealing Council), and yet they still get the same enormous pensions.I don't get it.

Tania Bapuji ● 2267d

Errrr, and it would explain a LOT?    😨

Rosco White ● 2267d

The report shows quite a high proportion of property investment which probably isn't sensible for an authority whose revenues are going to be so dependent on property going forward. It would be interesting to find out if there is investment by the fund in any of the projects in the borough. Not sure if this is necessarily illegal but it is probably not deemed best practice.

Andrew OSullivan ● 2267d

I got a response to this post on the Ealing forum which directed me to the latest report on the borough pension fund. This showed it is in deficit to the tune of £230mn and the Council is being required to put in £13mn a year to cover the shortfall. This is a substantial proportion of the borough's revenues.

Andy Jones ● 2267d

Oh Dear.  😨

Rosco White ● 2269d