GWENT council workers are being reassured their pensions are safe, despite a projected £522m funding black hole.
Fund chiefs blame the deficit on poor stock market performance and the Iraq War - but any gap will have to be filled by taxpayers.
All five of Gwent's local authorities currently contribute to the Greater Gwent pension Fund, which is run by Torfaen council.
But the fund, which covers 36,000 workers, is seriously under-performing and has just 60 per cent of the assets it needs to fund the pensions it is liable for.
The black hole has been growing since 1998 when the deficit was valued at £144 million; by 2001 that had grown to £243m.
Now, as the projected funding gap hits £522m, the Gwent scheme has been declared one of the worst-performing in the UK.
Newport city council, whose share of the deficit amounts to £90m, is now writing to the Welsh Assembly and Torfaen council urging action. At a meeting of the city council cabinet this week the fund was labelled a "disaster".
Councillor Bill Langsford, Newport council's business manager, said: "It is a very poor performance. We need to go to the Welsh Assembly and to Torfaen council to express our concern because the fund has just got worse every time we have had a valuation."
The pension fund includes government bonds, corporate bonds and property trusts, but is mostly made up of stocks and shares which have fared badly in the past few years.
Council finance chiefs maintain their employees' pensions are safe, but admit they will have to find the cash to plug the hole.
They have two options, either they can make a general increase to their employer pension contributions or put lump sums into the fund - both options would mean dipping into already tight council finances.
A Torfaen council spokesman said: "All employers have been kept up to date with the fund.
"The figure of £522 million is a 'notional' assessment based on long term projections. It assumes that if for some reason the fund had to meet every single member liability on a given day we would have a shortfall of £522m. But this will not occur.
"The last three years have seen some very significant world events outside the local control of funds including depressed equity markets, terrorism and the Iraq War. All had significant adverse effects on global markets which affected virtually all pension funds."
A spokesman for Newport council added: "Newport city council is concerned that the overall funding position has worsened since the previous valuation at 2001.
"This will require higher contributions to the fund until the deficit is eliminated. At the levels suggested it will take 20 years to put the fund in balance and this impacts significantly on the city council's budget preparations.
"The higher employer contribution levels have already been anticipated and built into the forward revenue budgets."
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