Friday, 8 October 2010

Council pension bill up 139%

Lord Hutton
In 10 years the pensions bill at Edinburgh Council has shot up 139%.

Ten years ago the Council's bill for pension payments was £32.176m.  For the year to 31st March 2010 the bill was £76.879m.  That is an increase of 139% in cash terms. The inflation rate (RPI) for the same period was just 31.1%. 

What are the causes of this huge rise? 
  1. Staff numbers have increased.  In the period, staff numbers rose from 15,320 to 16,453 full time equivalents.  That is over 7% up - even after advances on technology and ongoing efficiency savings.
  2. The burden on employers has increased.  For the Local Government Pension Scheme, in the ten year period, the proportion of pensionable pay employers pay has increased from 13% to 20% (that is an increase in the employer contribution rate of 54%.)   For teachers the equivalent rate has increased from 6.9% to 14.9% - an increase in the rate of 116%.
  3. Benefits have increased.  There have been improvements in the benefits of the scheme which have led to higher contributions from employers.
Here is part of the answer to why, on a local level it is so difficult to bring roads and pavements up to a reasonable standard.  Here is part of the reason why the nation is wrestling with a debt crisis. We have spent rapidly increasing amounts of money on paying our staff.

A subsequent post will address what the Government needs to do in response to the initial report of Lord Hutton on public sector pensions, which was published yesterday.

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