The decision by Carmarthenshire County Council and Pembrokeshire Council to allow its senior officers to opt-out of the Local Government Pension Scheme (LGPS) was 'unlawful', according to reports from auditors.
The reports, by the Welsh Audit Office, found that both Carmarthenshire and Pembrokeshire should not have made the payments to senior officers to enable them to make their own pension arrangements.
Pembrokeshire would have paid its chief executive and one other senior officer over £50,000 by the end of March 2014, and Carmarthenshire has paid over £27,000 to its chief executive since 2012.
Appointed auditor, Anthony Barrett, said: 'Pembrokeshire Council has acted unlawfully and urgently needs to rescind its decision around pensions opt-outs and stop any further payments to senior officers.
'The public should be able to expect the highest standards of decision making at local authorities and the council must now address the procedural weaknesses I have identified in my report. It needs to demonstrate to its electorate that it is operating in accordance with the law and in line with good governance principles.'
In reponse to the report, deputy leader of Pembrokeshire Council, Cllr Rob Lewis, said: 'This report deals with a number of complicated issues. While I note the auditor’s views in relation to the decision taken, I am pleased he has concluded the council could take a lawful decision once a number of procedural matters have been addressed.'
The report into Carmarthenshire County Council also found it acted unlawfully by granting an indemnity to the chief executive to bring a libel counterclaim against an individual.
Mr Barrett said; 'Carmarthenshire Council has acted unlawfully on two fundamental issues, both of which the public need to be fully aware of. The authority has taken decisions and used taxpayers money in areas that they do not have the legal powers to do so.
'I welcome the fact that the council has rescinded its decision over the pensions issue, it now needs to do the same in relation to the libel indemnity granted to the chief executive.
'It is also of vital importance that the council addresses procedural weaknesses in its decision making, as highlighted in my two reports today, so that it exercises its discretion and authority properly on such important matters.'
