The bulk of the £752m losses in 2008/09 were made up by a £815m loss in the market value of investments to the Lancashire County Pension Fund, which covers more than 53,000 current local government workers and 72,000 pensioners across the county.

The pension fund covers most public sector workers in the county.
Finance experts warn the taxpayer will have to pay the price after figures, revealed in the annual accounts, show how the scheme's assets have dropped from £3.7bn in April 2008 to £2.9bn, recorded on March 31 this year.

The scheme's overall deficit will be not calculated again until March 2010 but it was estimated that the fund had a deficit of £2.1bn in December last year, when assets were worth £400m more.

Lancashire pension fund treasurer Phil Halsall said: "The county pension fund is facing challenging times because of national and worldwide economic conditions but one should never look at this in the short-term as these are very long-term issues.

"As an accountant, I would say it is encouraging to see over the last six months that markets have improved."

Ribble Valley independent financial expert Andrew McLaughlin said: "We will be paying for this in the long run through taxes. The pension system in this country is broken and the ability to deliver final salary pensions is no longer sustainable."

Coun Bill Winlow, the county council's Liberal Democrat group deputy leader, said: "As a council, we have got to get a grip on it."

Losses were made to "pooled investment vehicles", where funds are along with other investors' money, equating to £433m. And £265m was lost in shares, £68m to property and £55.2m to fixed interest stocks.

>>Council pension deficit grows to £2bn

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