Taxpayers in three Black Country boroughs are still forking out £5.3 million a year for “enhanced” pensions for council staff, it has emerged.

Under rules which were abolished in 2006, employees who were asked to retire early to help cut costs, had their pensions topped up to the level they would have received if they had stayed to normal retirement age.

Someone who agreed to retire at 60, for example, would have had an extra five years’ worth of pension paid for them.

But the payments had to come out of the authority’s general budget rather than from the pension fund.

In Wolverhampton alone there are 1,655 pensioners getting a boost from the council’s main budget, costing £2.7m a year.

In Dudley the so-called “unfunded liabilities” cost taxpayers £1.1m a year, while in Sandwell the bill stands at £1.5m.

The councils have been allowed to transfer around a third of this into the main West Midlands Pension Fund, despite it running at a deficit of £3.3 billion.

Walsall Council was unavailable for comment but is understood to have been able to do the same.

Mark Taylor, Wolverhampton City Council’s head of corporate finance, said: “The majority of pension costs for those staff who are now receiving a Local Government Pension Scheme pension are met from the Pension Fund. A small element is met by the employer.

We have an opportunity created by a regulation that expires on March 31, 2012, to move some of these payments to the Pension Fund for future payment.”

Wolverhampton Conservative councillor Wendy Thompson said: “These enhanced payments were agreed a long time ago but we are still paying. By moving £718,000 into the main pension fund, the cost to the council has reduced to £2m.”

Dudley’s cabinet member for finance Councillor David Blood said: “Dudley pays £1.1m per year for unfunded liabilities, and expects to transfer about a third of this into the pension fund.
“Exact arrangements are still being discussed.”