There is “serious weakness” in the pension fund for public sector workers in Waltham Forest which is likely to get worse, according to a report by an influential think-tank.

The Centre for Policy Studies has highlighted the authority is one of 89 across the country in danger of being unable to meet its liabilities, raising the possibility of a bail-out by taxpayers.

The think-tank’s research found just 60 per cent of Waltham Forest council’s fund is covered by current contributions.

It says the deficit is likely to widen as increasing numbers retire due to an aging population and fewer staff are recruited.

Michael Johnson, of the Centre for Policy studies, said: “The coalition has recognised the need for reform, but its proposals are compromised by political considerations masquerading under the banner of localism.

“It is a national embarrassment.

“As for Local Government Pension Scheme funds with cashflow issues, asset sales could initially plug the gap, but deficits would then increase, exacerbating the cashflow problem, a death spiral would then ensue, leading to fund collapse.

“Indeed, some funds may already be beyond the point of no return. This is partly the result of dismally incompetent governance.”

The author made nine recommendations, including merging the 89 funds and raising contributions paid by employees.

Another suggestion is that the responsibility for paying pensions should fall to a trust.

Waltham Forest council has been approached for comment.