The Argus has discovered a black hole in the pension schemes of Gwent councils that amounts to nearly half a billion pounds. MARK CHOUEKE and EDWARD DAVIE report on its potential consequences - cuts in services and increased council tax
THE massive deficit in the Greater Gwent Pension Fund is being blamed on years of a poorly performing stock market.
Although a stock market recovery would reduce the deficit, experts are warning that council tax payers will have to foot at least some of the bill.
Workers paying into the pension fund, who include council staff, police officers and college lecturers, are guaranteed their pensions.
But the figures suggest that Gwent's councils are committed to paying out £500,000,000 of pensions that they simply do not currently have in the fund.
The extent of the problem first came to light at a meeting of Monmouthshire council's audit committee.
The committee was told that Monmouthshire's deficit alone was £70 million.
The briefing by the authority's accountants Pricewater-houseCoopers said: "The deficit represents almost five times the level of balances and reserves held by the authority.
"The pension fund is one of the most significant financial pressures facing the authority."
Monmouthshire is not alone: Caerphilly's deficit is £137 million; Blaenau Gwent's £87 million and Torfaen's £90 million.
Newport did not make its figures available, but as one of the largest Gwent councils it could be as much as £120 million.
Councillor William Graham said: "We have 7,500 employees contributing to the fund on a regular basis. The figure could be anything."
The figures are based on the last assessment from March 2001 - a new assessment will be carried out this year.
The new figures will determine the amount Gwent councils will have to increase their pension contributions by.
This will mean either a rise in council tax or service cutbacks.
However, local government employees can be reassured their pensions are guaranteed and their contribution is fixed at six per cent.
Public sector union Unison's local government representative Paul Elliot said: "Five years ago pension funds were very rich and many local authorities took a pension contribution 'holiday'.
"When the stock market collapsed the deficit got worse and worse.
"The stock market has recovered somewhat but the authorities will have address the remaining deficit either by increasing council tax or cutting services."
Torfaen's pensions manager Rod Senior admitted Gwen's local authorities faced the massive task of incorporating the deficits into their budgets over the next 15 years, but said there is no need to panic.
Mr Senior said: "If everybody retired tomorrow and claimed their benefits, clearly we wouldn't be able to afford the pay-out.
"If we could survive such a situation we'd be managing the perfect pension scheme and obviously, that's the ideal we strive for.
"These deficits are to be addressed over the next 15 years.In the meantime, we have enough in the account to pay claimants. We depend on a stock market that had three terrible years up to 2003 but is starting to improve."
Caerphilly's cabinet member for resources, Colin Mann, said: "This deficit is common to all contributors and ours is likely to be the biggest as we are the biggest local authority of the five."
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