£3bn black hole in public sector pensions

The pension black hole for public sector workers in the West Midlands has risen to more than £3 billion.

It comes after Wolverhampton City Council revealed its pension deficit rose almost 50 per cent in the last year. The council fund had a gap of £314 million to fill a year ago but now has a deficit of £465m.

That figure is only Wolverhampton's share of the West Midlands Metropolitan Authorities Pension Fund, administered by Wolverhampton City Council.

All councils in the region - Wolverhampton, Walsall, Sandwell, Dudley, Birmingham, Coventry and Solihull - pay into the pension pot.

Last year the combined deficit had already reached £2.8bn and is now certain to be well above £3bn.

The recession and the subsequent fall in the stock market has seen the value of investments held for the pension fund fall sharply.

The crisis at BP is also likely to have an effect, with shares hit and dividends scrapped.

Today's Wolverhampton deficit was revealed as the council released its annual accounts. Accounts from other councils in the pension fund are likely to show a similar rise in the deficit.

The black hole would only pose a problem if most of the 105,000 public sector workers paying into the fund suddenly left and began to draw their pensions.

Campaign group the Taxpayers Alliance today described the figure as shocking, calling the public sector pension deficit "a huge ticking time bomb".

Nationally in 2008 the deficit for public sector pension funds rose to £53bn from £42bn the year before.

The TPA has claimed that £1 out of every £5 of council tax was spent on employer contributions under the Local Government Pension Scheme.

Today it can also be revealed that a £5m black hole in council reserves in Wolverhampton has been filled.