By Professor John Clancy and Professor David Bailey
17th February 2026

The Wolverhampton Hoard.
Wolverhampton holds on to Brummie £Billions

Birmingham gets thrown a welcome, but still-not-enough, £165 million refund from its Pension Fund.

Just-published budget shows £55m-a-year back into revenue, but hides at least £20m-a-year budget spend on pension fund management expenses, almost entirely to investment bankers.

• Wolverhampton tries every trick in the book to keep its £11B surplus from employers.
• Birmingham's Employer contributions fall from 27.2% to a still-ridiculously-high 16.5% on every employee payslip, inflated by at least 3.5% added for scandalous at least £20 million pension fund management expenses.
• Birmingham sets a budget for bankers, not Brummies.
• A ridiculous further 2% added due to completely unnecessary addition of never-used-before 'funding buffer' - they'll shamelessly try anything.
• Birmingham council officers simply accept the Wolverhampton pension diktat without challenge on behalf of Brummies.
• Refunds a huge victory, but it should be more than double that: probably treble.
• Wolverhampton won’t return Birmingham’s bonkers deficit reduction payments, and hoards the vast majority of Birmingham’s surplus of at least £2.5B.
• Surplus deniers at BCC forced to face the awkward truth.
• Pressure from BlogsFromTheBlackstuff.com achieves partial victory for Brummies.

Birmingham’s 2026-27 City Council budget announced, with little fanfare, the return from its pension fund of almost £165 million to the council’s’ revenues, with over £55 million a year refunded through employment pension contribution reductions.

We repeatedly predicted the imminent, inevitable return of hundreds of £millions to the Council’s revenues, and that the Council should have factored this into its financial plans.

The Overlook

Instead, guided by two hapless, gullibly naïve, financially illiterate chief commissioners, Birmingham obstinately, and we would argue deliberately and foolishly, overlooked the imminent, inevitable pension fund refund. Which even at this initial partial level has massive impact.

The City Council’s budgets were not based in predictable, predicted economic reality.

The Commissioners failed in their roles as overseers of Birmingham City Council’s budget.

In fact, they were doing very little overseeing - and doing a lot of overlooking.

The 'medium-term-financial-plans'

Both Commissioners encouraged the Council to come up with 'medium-term-financial-plans' - shorthand for medium term cuts to people and services - but to overlook the Council's pension fund Budget position.

But at no stage did those 'medium-term-financial-plans' include the inevitable start of 100s of £millions in refunds, however partial, from the pension fund.

They certainly didn’t include requesting the start of these refunds a year earlier, as they could have done.

And should have done.

When they did come up with a new 'medium-term-financial-plan' last October all they could nail it down to was about £14 million a year.

Brummies ought ask for their money back – for the £millions wasted on daily fees for commissioners - who literally did not know what they were doing.

And when Wolverhampton came up with its ‘box of tricks’ to keep the hoard, Birmingham's commissioners' and officers' dimness about what was going on hardly put them in a position to do what they should have done - to challenge head-on Wolverhampton’s utterly nonsense-filled calculations.

So, yes, we welcome the fact that we were right and the economically illiterate Chief Commissioner No. 1,  Max Caller, has been found out to be very wrong indeed. And we do hate to say we told you so.

And we are perfectly happy to give advice directly to Chief Commissioner No.2 - because we think he needs it.

We also welcome the fact that £155 million is coming back to Birmingham over the next three years.  It will have real impact.

But why should this be challenged as not yet enough?

Wolverhampton wants to wipe the slate clean and start again, so we all ignore their colossal and catastrophic stewardship of £23 billions-worth of West Midlands wealth - based on fundamental miscalculations, misjudgments and incompetence. And while they hoard £11 billion of taxpayer employers' money.

They think they can just start the clock running again for the next 20 years and hope everyone will disregard what’s happened over the last 15 years.

By giving a big chunk back sort-of now, they hope they will get credit even though the credit is actually being granted to them - in the form of an £11 billion pound 20-year unsecured surplus loan from the taxpayer to them, and their mates in the city to play with, and legally skim £142 million a year from in expenses.

So how have they tried to do it?

We’ll explain how the box of tricks has been used to protect the Wolverhampton Hoard and bamboozle Birmingham City Council’s officers, in particular.

But first, the wider context. As we’ve pointed out in earlier blogs, the West Midlands Pension Fund has a surplus of at least £11 billion due to Wolverhampton Council’s colossal incompetence. It’s 200% funded.

It’s got double the amount of assets it should have today to pay out all pensions due to today’s employees and current pensioners. That’s not a sign of success. It’s a sign of incompetence, miscalculation and misjudgment.

To protect the taxpayer as employer from overpaying into the fund, the whole system is designed to be 100% funded. But Wolverhampton seems unable to grasp this basic concept.

Wolverhampton Council inexplicably runs the fund on behalf of the 7 Metropolitan Councils and the Combined Authority, but that’s only about half of the fund.

The non-teaching staff in all the state schools and FE Colleges in the West Midlands, and most of its universities, make up the vast majority of the other half. The non-uniformed staff of West Midlands police and fire services, and 100-odd other essentially state-funded employers make up the rest.

So in terms of protecting the taxpayer, Council or otherwise, you can see that this affects taxpayer spend everywhere and affects every community and neighbourhood.

Wolverhampton doesn’t want to give this £11 billion surplus money hoard back to taxpayers. And arrogantly, but erroneously, it thinks it shouldn’t have to.

So it has used every trick in the book to keep the hoard safely in the Wolverhampton Hoard Museum.

Here are the tricks they’ve tried to pull on the West Midlands taxpayer, and through the prism of Birmingham’s taxpayers, but the same applies to all the other councils and employers, particularly in everyone's local schools and FE colleges.

Trick 1 – Massively Cut Total Contributions Now to distract attention, and make it look like it’s a massive refund, solving everything for good

Just 3 years ago in February 2023, Birmingham was paying by far the largest UK employer contributions of any UK Council.

It was a staggering, unsustainable and, for Birmingham, catastrophic 37% in Employer contributions - on the salary of every employee.

The Employer contributions demanded and, without challenge, handed over to Wolverhampton amounted to £134 million a year, including the Children’s Trust.

7 months later, it declared effective bankruptcy.

From 2016 to 2023 Birmingham had handed over £1 billion in employer contributions to Wolverhampton. It has been our contention throughout the last 15 months that it was this burden more than anything else which caused Birmingham’s bankruptcy.

So when Birmingham City Council officers were told last month that the contribution rate was going to fall (wait for it……) to 16.5%, with contributions falling by £55 million in one year, it looked like a huge, generous, appropriate, honest response by Wolverhampton. It isn’t.

It seems clear this came as a total shock to Chief Commissioner Tony McArdle, and to Birmingham City Council officers, as they had spent most of the last year privately ridiculing our assessments here at BlogsFromTheBlackstuff.com to councillors - and particularly in briefings to supine, gullible local journalists (Mark Gough and ITV News Central aside, who have covered this story three times). And similarly gullible national journalists, for that matter.

They certainly hadn’t included this in their commissioner-inspired medium term financial strategy this year, or last. Not even last October 2025.  But they ploughed ahead with the cuts nevertheless.

Consequently they were unlikely, having been so dim on the matter, to have challenged Wolverhampton over the wonderful, bounteous 16.5%.

When they should have.

Trick 2 -  introduce, for the first time, a Funding Level ‘Buffer’ of 120%

For the last 20 years the West Midlands Pension Fund has worked out its funding level on the basis that it should be 100% funded. All calculations flow from that assumption.

A 100% funding level means that the fund has enough in assets today to pay all future pensions due. Well er….why would you want any more?

Well you’d want more if you wanted to keep the contributions as high as possible.

So that’s what they’ve done. They effectively start their calculations for employer contributions by completely disregarding 20% of the fund’s assets.

They dress it up as ‘prudence’ but as we shall explain at Trick 4, all the prudence you ever needed has already been built into the system before this stage. It’s Pretend Prudence designed to hoodwink employers and taxpayers.

It’s as simple as that. It’s a ruse. It’s obvious when you look at it closely, But of course very few do.

So, again, the employer’s contribution has been hiked beyond what it should have been.

So that 16.5% figure they came up with, using WMPF's brand new 120% funding level buffer, should actually have been 13.3% for 100% funding. So the stupid buffer adds 3.2% to Birmingham's employer contributions. It might not seem a lot, but it's actually £17 million a year extra. We warned the Commissioners to challenge this straightaway, as soon as the proposal emerged.

Trick 3 -  hide the awkward management expenses in the headline reduction

This year the West Midlands pension fund will hand over £142million in management expenses, almost entirely to investment bankers who look after its investments. Or rather to look after taxpayers' investments.

As we have pointed out here, what Wolverhampton has never properly communicated to the fund’s councils and other employers, is that their employer pension contributions contain an a top-up - specifically added to pay for the fund's top-sliced £142 million-a-year management expenses.

Here’s what the biggest local government pension fund, Greater Manchester, properly explained the position to be in its last annual report.

So the 16.5% includes a hefty portion simply to pay Wolverhampton’s now annual £142million management expenses.

We calculate this now to have reached £20 million annually for Birmingham City Council.

We also calculate 4% of the 16.5% to comprise Wolverhampton’s management expenses.

As we've pointed out here in these blogs, since 2020 the management expenses are simply top-sliced each year from the fund, regardless of performance or investment returns. The same 59-odd basis points proportion of the fund every single year now come rain or shine.

So a simple proposed amendment by the Wolverhampton City Council Pension Fund Committee to reword the Funding Strategy Statement and Investment Strategy to cap all management expenses, including investment expenses, at 10 basis points (as we and others have recommended, and happens elsewhere) would result in Birmingham's 16.5% reducing to 12.5%.

If we add this to our reduction for the stupid buffer, then Birmingham’s employer contributions (even under Wolverhampton’s original questionable calculations) should actually be 9.3%, not 16.5%.

It might not seem much, which is what their overall trick wants you to think, But for Birmingham it amounts to a return of £80 million a year. A reduction from £142m a year last year to £48.5 million, this year.

So Wolverhampton are proposing to reduce Birmingham's pension contributions this year to £86 million at 16.5%, but at 9.3% it could be (and should be) just £48 million. That's £80 million-a-year back in the accounts.

Birmingham's Chief Commissioner and officers should have countered with this, at least.

Trick 4 Suppress the surplus - ignore real investment returns - blather, rinse, repeat.

Here are the net investment returns, as an annualised figure of all the England and Wales 87 local government pension funds, up to 2024 for that year and the previous 3, 5, 10, 20, and even 30 years.

These are essentially the government's own figures, from the Scheme Advisory Board set up by government.

You can see that long term returns (10 years and over) are well over 7%. Mainly because if combined this would be the 5th biggest asset fund in the world. It's a big player. You don't get middling returns.

Unless you are the people doing the calculations at the WMPF.

In 2023 they reckoned the long term returns were going to be 4.3%. In 2020 it was 4.6%. In 2017 They reckoned it was 4.7%.

They kept getting it wrong, and repeating the same mistake again and again. Repeatedly coming up with nonsensical explanations as to why their fund isn't and wasn't getting over 7% a year long-term. When, like everyone else, it actually was! And always had been.

There weren't and aren't actually that many uncertainties in the markets long-term - you can see from the evidence.

So it's been Total WMPF Blather. Then rinsing the employers for the wrong contribution rates. Then repeating the same mistake. Blather, rinse, repeat.

It's a crucial number - because this figure (sometimes called the discount rate) is what is used to set the employer's contributions. The lower the figure, the higher the contributions. If you calculate too low a figure for the likely future assets, it also creates too high a figure for the present and future pensions. This is how deficits that don't actually exist appear.

They also create real, but then hidden, mega-surpluses.

This year WMPF finally had to correct their figures upwards, but only to 6%. Nevertheless, this leads to a huge change in contributions. Hence the sudden drop to 16.5%.

But their bonkers calculations up to this year is what caused illusions of deficits, but very real massive hikes in taxpayer contributions. Then the sudden dawning reality of mega surpluses.

For over a decade, there was never any need whatsoever for contributions to have been more than around 16% or less, all this time.

So in choosing 6% this year, rather than the obvious 7% or more, they had already baked in what they would call 'prudence'. This is why adding the 20% buffer is a completely unnecessary prudence upon prudence distraction at the end.

In addition, at the start, they have pre-baked the cumulative effect over 20 years of the huge management expenses of the fund by using a net, rather than gross figure for the returns.

Birmingham's contributions this year should have fallen to 6%, not 16.5%.

In conclusion, had they started with 740 basis points, and knocked off 50 points for prudence sake, therefore dispensing with the later 20% buffer, and brought their management expenses under control at 10 basis points, Birmingham's Contributions would be more likely to have been 6% or less to correct the mistakes. And in order to deal with the return of the £11 billion mega-surplus hoard in the Wolverhampton Hoard Museum.

That would bring the surplus back to Birmingham by £100 million a year, for the next three years.

Coming soon.....Return of the Wolverhampton Hoard

In our next blog, we will go further. We will explain how the West Midlands Pension Fund's demands for deficit reduction payments were always for a deficit which never existed, if the calculations had been done correctly as far back as 2013.

And that, in consequence, the £billions paid in deficit reduction payments (called secondary contributions) by employers for a deficit which never existed, are not subject to the normal rules of returning surpluses, and should be returned in full, straight away.

And for Birmingham those so-called deficit reduction payments amounted to a Wolverhampton Hoard of £0.5 billion.