The report by Michael Johnson found that had employer contributions not risen substantially during the year by £833m, cashflow would have continued its long-term deterioration.
“This unambiguously signals that the LGPS is unsustainable,” he commented. “Given that employer contributions are predominately taxpayer-funded, a surreptitious state-funded bailout has commenced.
“While 2013’s £47bn deficit is expected to increase at the next triennial valuation in March 2016, it is negative cashflow that is likely to be the LGPS’s undoing.”
At the end of March 2015, the LGPS had assets of £214bn and 5.17m members - more than 10 per cent of all adults in the UK.
If the LGPS were presented as a single fund, it would rank sixth by size, globally.
In the last financial year, fund income of £16bn exceeded total fund expenditure by £3.1bn, but without that year’s £833m increase in employer contributions, the core net cashflow would have been -£301m.
|Total expenditure on benefits||-£5,981||-£6,733||-£7,190||-£8,026||-£8,005||-£8,388||-£8,856|
|Core net cashflow||£1,882||£1,553||£1,287||£293||£93||£59||£532|
|Investment income (gross)||£2,999||£2,690||£2,827||£3,191||£3,142||£3,338|
|Net transfers and others||-£288||-£412||-£404||-£309||-£444||-£463||-£377|
|Total net cashflow||£4,593||£3,831||£3,710||£3,175||£2,791||£2,934||£3,130|
While employee contributions increased by £108m, every year they have formed a smaller proportion of total expenditure on benefits - 34 per cent in 2008/09, compared to 23 per cent in 2014/15.
Chancellor George Osborne has said he will merge the 89 LGPS funds into six British Wealth Funds, suggesting these would invest more in infrastructure, but Mr Johnson has suggested this may not be enough.
The Department for Communities and Local Government has been asked to comment on the findings.