CHAPTER 7
Local authority pension funds
7.0.1 This chapter describes the pensions for local authority employees. It is divided into the following sections:
7.1 Pensions for local authority employees
7.1.1 The pension funds in the Local Government Pension Scheme provide pensions for most local authority employees. In England there are 81 pension funds in the Local Government Pension Scheme. The assets of the pension funds are for meeting the future pension liabilities of the funds, and are part of the financial corporations sector in the National Accounts, not part of the local government sector. Pensions paid out under the scheme are therefore part of the expenditure of the pension funds, not of the local authorities that administer them. Employers’ and employees’ contributions, part of the income of the funds, are recorded as expenditure by local authorities in their revenue accounts, either directly or indirectly under employees’ expenses.
7.1.2 Separate arrangements apply for the pensions of the police, fire fighters and teachers. The police and fire fighters’ pensions are provided through unfunded schemes administered locally, and the cost of police and fire fighters’ pensions are therefore included in local authority expenditure. Teachers’ pensions are provided through a notionally funded scheme administered by the Department for Education and Skills (DfES). There is no fund of assets, and teachers’ pensions are paid by the DfES. Employers’ and employees’ contributions are paid by local authorities to the DfES and are recorded as expenditure in their revenue accounts.
7.2 The Local Government Pension Scheme
7.2.1 The following tables, charts and commentary provide information and statistics on Local Government Pension Scheme expenditure, income, the number of Local Government Pension Scheme members and the market value of the funds from 1994-95 to 2005-06.
- Local Government Pension Scheme expenditure on benefits in 2005-06 was £4,273 million compared with £4,014 million in 2004-05, an increase of 6%.
- In 2005-06, about 78% of Local Government Pension Scheme expenditure in England was on benefits in the form of lump sums, pensions and annuities for retired members and their dependants.
- In 2005-06, 60% of the income of the Local Government Pension Scheme came from employers’ and employees’ contributions.
- Income from employees’ contributions to the Local Government Pension Scheme in 2005-06 was £1,576 million compared with £1,431 million in 2004-05, an increase of 10%.
- Income from employers’ contributions to the scheme rose by 16% to £4,124 million in the same period.
- Income from investments rose by 14% in 2005-06 to £2,639 million.
- There were more than 1.6 million employees in the Local Government Pension Scheme at end March 2006, an increase of 2.5% from March 2005.
- There were nearly 1.0 million pensioners (including dependants) in the scheme at end March 2006, an increase of 2.2% in the year.
- The market value of the funds at end March 2006 was £113.0 billion, an increase in the year of 26%. In the same period the FTSE All Share Index increased by 22%.
