By Professor John Clancy and Professor David Bailey
13th January 2026

When you’ve filled in the hole - stop digging:
West Midlands Pension Fund finds £1.1 billion down the back of the sofa

Birmingham Taxpayers still paying £1.2 Million a month in “deficit reduction payments” to the West Midlands Pension Fund - when everyone knows there is no deficit.

In fact, last month the fund’s surplus quietly increased by a further £1.1 billion.

Last month’s Pension Fund Committee meeting at Wolverhampton City Council dropped a number of bombshells, which we have reported on.

In particular, how the catastrophic miscalculation of massively underestimated returns on investments meant the fund had massively overestimated the size of its liabilities over at least the last six years.

This led  to massive pensions overpayments by the 7 Met Councils, the Combined Authority, the police service, the fire service,  and over 700 more employers in the region including every state school,  every Further Education College and almost all of its universities.

What had been presented only four years ago as a fund in deficit, actually had a stonking great surplus based on 31st of March 2025 figures.

In our Christmas Eve blog we calculated the surplus to be

£8.3 billion.

instead.

This surplus is owned by the employers, and that means the taxpayer. Every single one of these employers is funded by the state.

If you pay income tax, council tax, National Insurance, Asset taxes, or you pay VAT on a Mars bar down your local sweet shop, or other VAT, you and your fellow taxpayers are owed this £8.3 billion.

But wait……at agenda item 9 appendix C came an update to the fund’s position since March 31st 2025.

And guess what? It turns out they found £1.1 billion down the back of the sofa in the six months until the end of September!

It obviously took a bit of time for what everyone knew were good investment returns over the last 18 months to filter through into the fund’s books. We thought the investment returns were suspiciously low when the 2024-25 figures first came out late spring.

Which means based on the asset increase alone the surplus increased from £8.3 billion to

at least

£9.5 billion.

We had calculated our surplus figure based on the 31st of March assets being £21.4 billion. Well, by the end of September, they were £22.5 billion.

This matters because the every-3-years actuarial valuation going on at the moment (which sets how much all of the employers should pay in employer contributions over the next three years) still has to take into account changes in the markets since the 31st of March 2025.

Those changes also must affect its estimates of investment returns.

This is why it turns out, as Solihull Pension fund committee member Councilor Leslie Kaye informed us, and reported in our last blog, the fund has ended up hoarding twice as much in assets as it needs to pay all of its total pensions now and into the future.

Which is why we know the fund is almost 200% funded.

As we know, the assets are now £22.5B. As Councilor Kaye tells us, with some further inside knowledge, they’re almost double-funded.  It must therefore mean the surplus is, as we reported on our last blog, at around

£11 billion.

This is based on an estimate of its liabilities using the fund’s own calculations which we believe still vastly underestimate future investment returns.

We believe they should be basing their estimates on what is now a proven track record over the last 30 years of at least 6.9% net. They stubbornly continue to assume 6%.

They mistook the weather for the climate. They saw the form and not the class.

And they are stubbornly deciding to pay

£142M a year

in management expenses.

The figure was updated at the same meeting to hand over a further £2.6M than planned in its budget adding up to this new £142M. This represents 59 basis points of the entire fund, which has to be annualised, compounded and deducted from the fund over the next 20 years or so.

If the fund calculated its figures based on a 6.9% investment return, and cut its management expenses to £12 million a year instead of £142M,  then the surplus owed to employers/taxpayers, should be

nearer

£15 billion.

And Birmingham's share of that would be likely

£3.5billion.

In what kind of world does a Chief Commissioner running Birmingham City Council think he/it is providing best value for Birmingham citizens by handing over £1.2 million a month to pay off an illusory deficit, when there’s actually a surplus of at least £2.5 billion on the fund’s own figures!?

And where the surplus is probably £3.5 billion on what we believe to be our more accurate figures?

Why hasn't he stepped in?

In September the Council clearly acknowledged they were paying £14 million a year for a deficit which didn’t exist.

But no action was taken.

They should have stopped paying and asked for a LGPS Reg.s 2013 64A(b)(iii) recertification from the fund in relation to these deficit payments at the very least.

But no.

From October-December 2025 they just handed over the £1.2 million a month, and will continue to do so in January, February and March 2026.

And if they knew early autumn about the £14 million, did Mr McCardle’s Chief Commissioner predecessor (financially-illiterate  Max Caller)  know about this £14 Million when sitting, perspiring in court awaiting the judgment on the judicial review of the closure of the day centres for the disabled?

Because if he did, then the judicial review would likely not have been out of time, as the clock would have started ticking when the Chief Commissioner and the Council knew about it. And the £14 million would certainly have been a highly material piece of evidence for The Honourable Mr Justice Eyre.

Was it in the legal bundle sent to Mr Justice Eyre at The King's Bench Division of the High Court of Justice?

Was there a missing note from the bundle that the Council knew its pension fund was in a multi-£billion surplus, but it was still committing to pay £14 million out of the same budget from which the cuts to the day centres were being made?

And if they didn’t know, why didn’t they know?

There wasn’t much of a hole to fill in the first place, but it was filled in years ago. It’s time to stop digging.