Doncaster council to take out £28m loan to pay for pensions

Doncaster's  Civic Offices.
Doncaster's Civic Offices.

Cash-strapped Doncaster Council must take out a £28 million loan to pay off a massive hole in its pension fund.

The cash is being borrowed to pay its share of the South Yorkshire Pension Fund deficit for the period October 2014 to March 2017.

The deal is revealed in documents which went before councillors at the authority’s Overview and Scrutiny Committee.

The council says the loan – more than the £16m the council revealed last month it was having to save to meet its latest spending cuts – will save the taxpayer £700,000 over three years.

Doncaster Council confirmed it would be taking a loan out for £28,013,000. The authority’s share of the fund’s total debt is 16 per cent.

Simon Wiles, the council’s director of finance and corporate services, said: “The deficit has arisen due to changes to the tax position of pension funds, the increase in life expectancy and the fall in income from investments, particularly government gilts.

“As pensioners are living longer they are drawing pensions for longer than was envisaged when the fund was originally set up.

“All employers who are members of the SYPF are addressing their respective deficits so that the scheme is sustainable in the long term.

“Employees are also paying increased contributions in order to sort out the deficit.”

UKIP Coun Paul Bissett said he was concerned about the size of the bill.

He said: “It is not just Doncaster that is affected by this issue.

“My concern is that we also have more pensioners have going into the scheme as they retire and leave their council jobs and fewer going into work there because we are losing staff.

“If that is the case then it will be the taxpayer who pays.”

Former Mayor Peter Davies said he thought the public should be told how the money was to be repaid. He said: “I think it is the result of wage awards to the higher paid staff in the council. The private sector wouldn’t have given some of the crazy awards we have.”

John O’Connell, director of the Taxpayers Alliance, said: “If we’re to face up to the challenges presented by Britain’s disastrous public finances, dealing with the pension black hole at Local Authority level is crucial.

“Borrowing to pay the deficit might save a little money, but it is a merely sticking plaster and barely that. The pensions deficit is another reminder of why it’s crucial we crack down on government waste.”

Readers also raised concerns over the matter on our Facebook page.

Dominic O’Malley said: “Who has a final salary pension these days? I was always told – by a good friend who works within the council – that the councils pension pot was in surplus. Wonder what’s gone wrong?”

Jase MacDonald said: “Maybe they could use less expenses...that’d free up some spare cash.”