By Professor John Clancy and Professor David Bailey
28th July 2025

Official: a £684 million Pension Fund surplus

in Birmingham City Council Accounts 2025

• Chief Commissioner Max Caller resigns within a week of the 2025 accounts being published
• Was he aware that concealing the scandal was no longer possible?

The only figure that mattered in the accounts was that they reported:

a pension fund surplus of £684 million.


£640 million for the Council, and at least £44 million for the Children’s Trust.

Surely that is the reason that Max Caller walked?

Well, now we know - the Council is directly owed £0.68 Billion by the West Midlands Pension Fund.

We think it's actually a lot higher, but for the purposes of this blog let's take what's in the accounts at their face value.

We've no doubt that officers will have told anyone who asked (although we doubt anyone did) that the operation of the IFRIC 14 "asset ceiling" means there is no surplus. But, as we shall explain again later, that is total er... moonshine.

Someone is going to have to sit these officers down with a cup of tea and try to explain how wrong they are.

As we keep saying in these blogs, and contrary to what you might think, a surplus in a council fund pension is not a good thing.

It is not a sign of success: it is a sign of incompetence.

A surplus of this size in a Defined Benefit pension fund is a very bad thing indeed. It shows conclusively that the Council has paid massively more into the pension fund than it should have done: that the pension fund managers spectacularly miscalculated and asked for silly money.

Success is a balanced pension fund. That is, the amount you owe in pensions matches the assets you have to pay them.

So the law says quite clearly (and obviously) that a surplus in a local council pension fund is actually owned by the council as the employer. We’d love that it was owned by the employees. But (because their contributions are fixed) sadly, the law says not.

A spectacular misdirection
Max Caller must have known the upcoming size of the surplus, and his failure to let councillors and Brummies know was a deliberate and quite spectacular misdirection. And we use the word misdirection advisedly.

Misdirection is one of the most significant legal words used when considering judicial review, so it has meaning on several layers here.

The 2024 accounts (which Caller definitely had before him a year ago) had already shown the deficit to have spectacularly plunged from 33% in the last publicly available accounts in 2022, to just 2% in 2024.

Did the Council misdirect itself in setting a budget without an actuary at least giving an estimate to officers and councillors as to what the position was before the budget was set, and the likely year-end position just a few weeks later?

And that there was a mechanism under 64A(b)(iii) of the LGPS regs to recertify and even cancel out completely the Council's employer contributions (currently standing at a ridiculous £128million a year) before the next valuation, i.e. immediately?

In which case July 14th is the starting date timer for a judicial review on the entire budget and council tax calculation.

In the dark, deliberately
All anyone could do was try to project forward from the only recent accounts available  - the 2022 accounts.  

As it happens we only now know the Council’s share of the assets at WMPF had fallen to 26% and its share of the accounting liabilities had increased to 28% since. Although there is absolutely no explanation in the accounts for this. But even this still left £684million. Nobody knew that because they were deliberately denied that information by the ex-Chief Commissioner.

The actuary had, in any event, operated a roll forward calculation from the 2022 valuation for the 2023 and 24 accounts. It's not difficult to do: the actuary could have done this within half-an-hour.

Without question that could have been done, and given to the councillors prior to them setting the budget for 2025-26. Max Caller decided he would be wilfully ignorant, and leave the councilors in ignorance too.

Reg. 64A(b)(iii) recalculation and refund
As we’ve said the council owns the surplus because the council’s contributions as employer are not fixed, they float.

Every three years they are set, but in between those three years the Council has the right to demand a new calculation and a change in what they pay (an effective refund) if it’s clear things have gone wrong. And, boy, have they gone wrong.

If the council runs its own pension fund, its pension committee can simply vote to do this.

If the fund is administered by somebody else, the Council effectively orders that they do this (and pay, if necessary, negligible early calculation costs) by making a request under 64A(b) (iii) of the Local Government Pension Fund Regulations, assuming the fund hasn’t already done this themselves under the same regulation.

The surplus is so massive because the council didn't reg 64A(b) (iii) recertify
So the reason there is a surplus is because the ex-Chief Commissioner caused it. He simply prevented its accounting crystallisation and refund under reg 64A(b)(iii) and the start of its return to Brum. We advised him to do precisely this last December 2024. It could have been done then. He ignored, and ridiculed, the advice.

And every day that the Council does not enforce its rights under section 64A(b)(iii) is another separate starting date for a judicial review into that decision not to. It is as judicially reviewable today as it was when Max Caller was first appointed.

And if the new Commissioner Tony Mcardle’s decides immediately not to enforce the Council’s rights under reg. 64A(b)(iii) that is reviewable from day one of his term and every day thereafter.

The council may have won the skirmish in court earlier this month on technicalities (over the alleged overreach in preventing scrutiny of closures of day care centres): it couldn’t count on that now in these circumstances. They might have thought they’d won the war, but they simply won a battle.

Incidentally even outside the regulations an employer has a right under wider pensions law to a refund of the surplus.

In the meantime, they should be forced to apply under reg 64A(b)(iii) to start getting this money back in this financial year. It should start with the reversal of everything paid already this year and with no further payments to be made. Cuts can then be reversed.

As we have already stated in previous blogs, under orders from the Chancellor, ALL of the West Midland Pension Fund's assets are going to be handed over next March to one of the new six regional mega funds. So with even more strength the entire surplus should be returned prior to that event.

How to hide one of the biggest Council Pension Fund Surpluses in UK history - pretend it’s not there!

In the early 2010s Accountants realised that their annual accounts were being messed up by pension funds. All accountants want to do is to tidy up and balance their figures every year-end.

But a pension fund makes this difficult, most especially if it is in surplus.

Accountants all jointly decided that even though an employer is clearly owed large sums of money from its employees’ pension fund, it was now OK not to put the surplus figures in the accounts until the surplus was actually received either through a straight refund or reductions in future employer contributions. The debt has to crystallise in some way.

So they introduced an accounting process (they called it ‘the asset ceiling’) which effectively, for tidying up purposes only, pretended the surplus wasn’t there.

When it was.

This was Max Caller’s fundamental misunderstanding: it’s an accounting trick - it’s not real.

(Incidentally, a pension fund deficit is still always included in the accounts and deducted from the assets of the Council. Hmm... Go figure. Literally.)

So the asset ceiling is used in Birmingham City Council’s accounts for the pension fund surplus, which is fair enough. That's what accountants do.

But it doesn’t mean the money has gone away somewhere. 

Far from it. It’s sitting there now in the West Midlands Pension Fund accounts, literally waiting to be returned. And it is owned by Birmingham City Council, not the WMPF.

The Children’s Fund blunder
Laughable, but serious at the same time, is what the Birmingham Children’s Trust (the council’s spun-off former-Children’s social services department) did with their (now) £44m surplus. It decided to simply say (literally) they were going to ‘disregard’ the surplus. Somebody told them to write that the possibility of the recovery of the surplus was ‘too remote’.

Somebody must have told them about the asset ceiling, and they didn’t quite get it. This appears (unamended and unchallenged)  in Birmingham City Council’s own accounts.

It’s an embarrassment.

So as the Children’s Trust is 1.3% of the pension fund in its own right, then it must mean a surplus of £44 million this year.

Pump up the surplus…..NOW
The failure to crystallise the refund means the Council and BCT, are still, every single month in 2025-26, continuing to pay into the West Midlands Pension Fund £1.8million for deficit reduction! To reduce a deficit which doesn’t even exist!

Had they crystallised the refund for this year they shouldn’t be paying any employer contributions at all (this year’s £128million would be deemed already paid). So in a galactically stupid act of self-harm, the unclaimed surplus is actually increasing month after month by £11million.

Glasgow City Council pension fund (the biggest local government Pension Fund in the UK) has already admitted (they probably shouldn't have) in its own 2025 annual report that its systems can output funding positions across the piece on a daily basis. This is an area where AI reigns supreme.

If Birmingham had asked the West Midlands Pension Fund last December what the position was, they could have told them in minutes, not months. And they can now.

Money which should be being spent on services now, or reversing cuts to them, is, in an Alice in Wonderland West Midlands world, being further handed over to boost the council’s own surplus held at the West Midlands Pension Fund.

There is a new Chief Commissioner. He has to look at this again and tell Brummies: it's coming home.