THE value of Merseyside’s public sector pension fund plummeted by more than £670m in just six months last year, new figures reveal.
Although fund managers say they can still meet their current liabilities, the news has alarmed workers concerned about the potential impact on their retirement plans.
And experts say council tax payers could foot the bill for topping up the fund if the value continues to fall, while workers may have to increase their contributions or face reduced pay-outs.
Merseyside Pension Fund (MPF) manages investments for thousands of civil servants at five local councils, housing trusts and staff at John Moores University and other local colleges. Those investments were valued at £4.255bn on March 31 last year, but figures from the end of October show they had tumbled more than 15% to £3.58bn, a drop of around £675m.
MPF pays out to 30,000 former public sector workers, and 50,000 current employees pay into it. About 20,000 have frozen or deferred assets in the fund.
One of the city’s leading pensions specialists last night said that, if the fund continued to fall, Town Halls could be asked to top it up. The cost would eventually be passed on to council tax payers.
Howard Hackney, a former partner at accountancy giant Grant Thornton, who now advises on investments, said: “[In final salary pensions] the employer has the duty to make up the final salary scheme and they have to make sure they have enough to make up the liabilities. It’s the councils which would have to make up the deficit. It’s likely to fall back on the rate payers and therefore the council tax is likely to increase if there’s a big deficit.”
A spokesman for MPF said it would be next year before any decision was made on extra contributions.
He said: “Employers’ contributions to Merseyside Pension Fund are determined by the actuarial valuation, which takes place every three years.
“The next valuation is in 2010, so at this stage it would be premature to speculate whether there would be any changes to employer contributions.”
He said the fund’s 2008 performance should fall within 1% of a “benchmark index”, although last year it was drawn into two of the credit crunch crises, with £7.5m saved in two faltering Icelandic banks.
Fund managers also found themselves embroiled in December’s Madoff scandal, in which American hedge fund manager Bernard Madoff appears to have been operating little more than a £33bn pyramid scheme.
MPF has £21m invested with Bramdean Alternative, a fund headed by City “superwoman” and former Birkenhead High school pupil Nicola Horlick. Ms Horlick's firm had £17m invested – 9.5% of its fund's assets – in Madoff’s scheme.
But Mr Hackney also said those receiving an MPF pension and current public sector employees should not panic.
