Political figures in the United Kingdom are urging Andy Burnham, a prominent potential contender for future leadership, to consider accessing a substantial surplus within local government pension funds to stimulate regional economies. The proposal suggests tapping into approximately £150 billion from the Local Government Pension Scheme (LGPS) to bolster local services without increasing taxes or borrowing.
The LGPS, which manages £550 billion for England and Wales, reportedly holds a surplus of over £150 billion, exceeding its obligations to its seven million members. Contributions from members and employers, including local councils and businesses, totaled more than £13 billion in the 2024-25 financial year, with nearly a quarter of council tax revenue directed into these funds. These contributions are invested in various assets, with members receiving guaranteed pensions based on their salary history.
Former Pensions Minister Ros Altmann has advocated for pausing these contributions to redirect funds toward improving local services such as social care, libraries, and waste collection. She described the situation as a "scandal," questioning why councils struggling with essential services are contributing to overfunded pension schemes.
John Clancy, a former public pensions expert and leader of Birmingham City Council, echoed these sentiments. He pointed to the Greater Manchester Pension Fund (GMPF), the largest in the LGPS with £33 billion in assets, which has amassed a surplus nearing £11 billion according to draft accounts for 2025-26. Clancy asserted that this surplus ultimately belongs to taxpayers, estimating that adults in the region are owed nearly £5,000 each.
Reform UK, a political party, has also proposed using a portion of the LGPS's £147 billion surplus to reduce council taxes by cutting pension contributions. The party further suggests transforming the LGPS into a sovereign wealth fund to invest in domestic businesses and projects.
However, the concept of pension payment holidays is not without controversy, and the legal standing of these surpluses remains unclear. Professor Iain Clacher of Leeds University Business School commented that while unlocking these surpluses could be an "easy win," it requires "very careful consideration and a full understanding of the costs, benefits and risks of doing so."
The proposals emerge as Burnham is reportedly developing an economic plan to address concerns from financial markets regarding public spending and taxation. His broader devolution agenda includes potentially granting regional mayors greater autonomy over tax-raising and spending decisions, such as setting business rates, a move that could alleviate pressure on struggling high streets and local communities.