Pensions - Articles - UK Detroit-style pension scheme catastrophe a possibility


BROADSTONE warns of potential UK Detroit-style pension scheme catastrophe

 The bankruptcy of the US city of Detroit has exposed a very significant deficit in its municipal pension scheme. Consultants at Broadstone believe that it is quite possible that something similar could happen in the UK.
 
 John Broome Saunders, an actuary at Broadstone, commented:
 “UK local government pension liabilities are around £200 billion, spread across around 100 different regional schemes. Pretty much every single scheme is in deficit, most schemes have adopted higher-risk investment strategies, and none of these schemes is protected by the Pension Protection Fund.”
 
 Broome Saunders believes that this potentially toxic set of circumstances has not properly been addressed:
 “Received wisdom in the UK is that local authorities don’t go bust – and therefore it follows that robust funding of their pension obligations doesn’t really matter. Events in Detroit provide a cautionary tale highlighting the naivety of such an attitude. UK central government has made clear efforts to improve the security of private sector pension schemes over the last few years – perhaps it should now turn its attention to local government schemes, before a Detroit-style insolvency leaves an entire region with tens of thousands of impoverished pensioners.”
  

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