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

Holey Moley
£0.5 billion spent on filling holes that didn't exist

Birmingham must pursue Wolverhampton for an immediate return of at least £440 million of deficit reduction payments

plus £180 million of investment returns they got from it

Here are the assets 2016-2026 of Birmingham City Council’s Pension Fund, held in Wolverhampton by the West Midlands Pension Fund (WMPF).

As you can see it’s more than doubled since 2016. Looks good doesn’t it? Almost doubled. It's actually very bad indeed, for the fleeced taxpayer.

Here’s what we now know its actual year-end liabilities should have been: i.e. what the pension fund should have calculated was owed in promised future pensions to all its (then) employees and pensioners:

Because in 2026 the West Midlands pension fund started finally to get their sums right (sort of), we can calculate back from that figure using broadly the same calculations as this year to restate the pensions which would have been owed each year. The only difference is, we have excluded the pension fund’s management expenses in the calculation.

One thing which is immediately apparent is that for the past 10 years, there had always been more in the asset pot to pay out all future pensions.

Even all future pensions to a then 16 -year-old new employee’s pensions, starting 51+ years into the future.

So here’s the difference

The problem is, that (because prior to this year the pension fund got their sums wrong), Birmingham was told that its pension fund had a huge great hole every year. That there was a deficit.

Birmingham City Council was told to hike its employer pension contributions because they miscalculated. In particular, WMPF Demanded a separate amount that the Council would have to pay, very specifically in ‘deficit reduction contributions’.

Here’s the extra Birmingham had to pay:

Birmingham shelled out £439 million from its revenues over the last 10 years in order, very specifically, to reduce its deficit at the pension fund. But it turns out there was never at any stage, over that 10 years, an actual deficit.

In fact, its highest deficit reduction payment of £62 million was made when we now know the pension fund was 54% overfunded, and had a surplus of over £1.5B!

So West Midlands pension fund has been found out by its own calculations.

They now accept that the pension fund assets were increasing by 6.5% every year, meaning a deficit never existed, because they should have used that figure every year. This would have provided proper stability for the fund, and its employers, as required under the regulations.

Instead, their miscalculations caused absolute chaos: the exact opposite of the circumstances the regulations set up the funds to provide.

In fact, the surplus was growing, in every year but one.

They should have used that figure back in 2016 and every year since.

This isn’t hindsight.

As we pointed out in our blog yesterday, the evidence was there that for the past 10, 20 and 30 years, the investment return across all the local government pension schemes was, and still is, over 7%.

So the 6.5% percent had, anyway, added (we would still argue unnecessary) prudence. There would not have even been a deficit in 2016 had they properly used 6.9%. (We also haven't included the Birmingham Children's Trust £90 million in salaries in these figures, so as not to complicate things further.)

So this is one of the reasons why Birmingham now has a surplus of over £3 billion in its share of the West Midlands Pension Fund.

These deficit reduction payments were called secondary contributions.

Birmingham also paid primary contributions. But they were hiked as well, because the fund messed up on its calculations.

So there was a double whammy for Birmingham City Council, and we think it is now very difficult to dispute that it was the completely unnecessary mega-contributions paid to its pension fund that broke Birmingham and forced it into bankruptcy.

So Birmingham has a Pension Fund surplus of over £3 billion. The really important question is what happens to that surplus?

We assert there are two types of surplus: the primary surplus and the secondary surplus.

The secondary surplus is the £440 million that was demanded for illusory deficit reduction.

We further assert this sits outside any provision in the Funding Strategy Statement about surpluses and deficits. It’s actually just a debt owed from the fund to the employer. And should be enforced as such.

Consequently, it should not be chopped over several future years and returned at the discretion and speed that the pension fund decides.

In any event the funding strategy statement could be amended immediately to determine that such secondary surpluses should be returned immediately.

It can simply be returned in the same way that it came in: through secondary contributions. Because the regulations allow for negative secondary contributions to be made. In other words a straight refund, in one go. This effectively happened in Kensington in Chelsea council Pension Fund last year.

That’s what should happen here.

We also believe the entire consultation with employers should be restarted at WMPF to ensure all employers are aware of what's happened, and have the opportunity to press for their own immediate refunds. They would have to do that in any event should they be judicially reviewed for failure properly to consult.

And in the meantime, Birmingham should formally ask for a refund via one, big negative secondary contribution. This year.

This is a chance for Chief Commissioner Tony Mcardle to shine.

And 6.5% a year needs to be added to each yearly deficit reduction payment since, because that’s what the pension fund made from those extra contributions from Birmingham. This, when cumulated would add another £180 Million to the secondary surplus, making £621 million due back.

Birmingham should get its money back now from the Wolverhampton Hoard.