Why do councils waste so much money on pensions?

Britain’s cash-strapped local councils are struggling to keep libraries open and pot-holes filled. So why are they overpaying by hundreds of millions of pounds a year to have their pension funds managed? In his latest article for the True and Fair Campaign, ROBIN POWELL looks at the Local Government Pensions Scheme, or LGPS, and how, far from reducing the amount they spend on the management of pension funds, many councils are spending more on it than ever before.

Pick up any local newspaper and chances are you’ll find an article about council finances under strain. Years of spending cuts have shaved services to the bone. Whether it’s roads full of pot holes, or reduced opening hours for public libraries, the signs of austerity are everywhere. And, after borrowing around £500 billion to cope with the pandemic, the Government is unlikely to loosen the purse strings any time soon.

Faced with such a crisis, councils up and down the land are having to find new ways of doing more with less. But are they overlooking an obvious way to save substantial amounts of public money deliver better outcomes? New data obtained via a Freedom of Information request suggests they are.

The area of spending in question is the funding of pensions for local government workers. Far from reducing the amount they spend on the management of pension funds, it seems that many councils are spending more on it than they have ever done.

Gloucestershire’s pension fund, for example, saw its overall investment management expenses soar by 20% to £7.8 million in the last financial year. The county spent £6.7 million in management fees — up 26% on the previous year — while performance fees rose by 4.4%, despite a 6% drop in the overall value of the fund.

READ THE FULL ARTICLE HERE

Picture: Dorian Le Sénéchal via Unsplash

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