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Councils are being urged to use huge pension windfalls to ease the funding crisis for local authorities.
There was no extra money for councils in the Autumn Statement, leaving them facing real cuts to local services over the next year.
Nottingham recently became the latest local authority to declare bankruptcy amid forecasts that almost a fifth of councils could soon run out of money.
But experts say allowing employers to cut their payments into the Local Government Pension Scheme – responsible for the savings of six million council workers in England and Wales – could provide a short-term solution if they instead spend the cash on services.
The LGPS has £364 billion in assets and invests mainly in shares. At a valuation last year it recorded a surplus of £22bn.
Crisis: Nottingham recently became the latest local authority to declare bankruptcy amid forecasts that almost a fifth of councils could soon run out of money.
The sharp rise in interest rates since then means that the present value of its liabilities (the promise to pay future pensions) has plummeted, so the scheme has a much larger surplus.
“Making some of this available through reduced employer contributions will make a huge difference to local authorities and their communities,” said Steve Simkins, of pensions consultancy Isio.
English councils face a £4bn funding gap over the next two years.
Mr Simkins said this could be solved if businesses reduced the annual amount they pay into the LGPS from £7bn to £5bn.
The LGPS said it is “actively considering” the windfall.
Councils told: Use pension riches to plug funding gaps