The Local Government Pensions Scheme (LGPS) has been branded a national 'embarrassment' that is 'approaching crisis' by a think tank.
Warning the current scheme was 'mismanaged', The Centre for Policy Studies has called for the LGPS's 89 'disparate' funds to be restructured as a single scheme.
It warned the LGPS risked running out of cash to meet pensions in payments, finding last year 30 funds in England and Wales had experienced negative net cash flow. The think tank warned the situation was also likely to 'deteriorate' as the scheme's headcount declines and the membership ages.
The report's author Michael Johnson said: 'Decades of lax, ineffective governance has allowed the LGPS to become a staggeringly inefficient, self-serving empire. The interests of those who work within it, or provide services to it, ride roughshod over the interests of the LGPS membership, employers and taxpayers, as well as economic rationale.
'In addition, resistance to change is facilitating a fundamental misallocation of risk and return, with value leakage of well over £1 billion annually, via performance fees (paid to third parties) and unnecessary operating costs, stealthily and iniquitously eroding capital.'
Local government minister Kris Hopkins has said action is being taken to 'reduce the massive and unsustainable cost of public sector pensions'.
