Cash-strapped Birmingham City Council paid £141.7million into their pensions last year (Image: Getty)
Almost a quarter of revenue in England is going towards generous schemes, with the average household paying £230 a year towards council workers’ retirement funds.
Local authorities paid on average £5billion into Local Government Pension Scheme pots over the past year, accounting for an average of 23.5 percent of council tax revenue, reports .
A Freedom of Information request showed that of those who responded, 14 councils paid more than half of the money they raised in council tax into pensions. A total of 254 of England’s 317 councils replied to the request.
The second largest pension pot contributor was Birmingham City Council, paying in £141.7million, who were forced to declare effective bankruptcy last year.
This is despite the average council worker earning almost £40,000 a year, well above the national average.
Councils spent almost £7billion on pensions over the past year, compared to just £2.2billion on emergency housing and £1.1billion on libraries, culture, heritage and tourism.
Tom McPhail, pensions expert at Lang Cat, said: “In the context of today’s economy and the decline of private sector pensions, it is extremely difficult to justify the continued generosity of the local authority scheme.”
He pointed out that while private pensions have become less generous, the local authority scheme has “just sailed blithely on regardless”, relying on taxpayers to subsidise their retirement.
The biggest pension spender was Hampshire county council, which contributed £281million, the same as £4,658 for each member of staff, but this was to cover three years of contributions.
The generous terms of the scheme mean members get a proportion of their final or career-average salary, with the proportion depending on how long you have been a member.
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People who have worked in local Government for most of their working life will usually get around half their final or career-average salary.
Councils pay in an extra 20 percent of their staff’s pay into the scheme, in stark contrast to the average 4.5 percent in the private sector. Council workers contribute on average five percent of their salary themselves.
John O’Connell, chief executive of the TaxPayers’ Alliance, called for change, saying: “These gold-plated pension schemes should be closed, with public sector benefits brought into line with those of the private sector.”
A spokesman for the Local Government Association, which represents local authorities, said: “The pension scheme can help encourage people to develop a career in local government.
“With pay often lower in local government than comparable private sector roles, the scheme can mitigate that while helping public sector workers avoid needing welfare benefits in retirement.”