Robin Hood in Reverse (2)
An interested reader has been in touch about the 'Robin Hood in Reverse' post - dated 22 June 2010.
While agreeing with the contents of the article - the reader goes on to ask about the many council officials who are allowed to leave the service - with a generous added years boost to their pension packages.
How come this only ever seems to apply to middle ranking and senior council officials - why do the lower paid groups never seem to get the benefit of added years? - the reader asks.
Good question.
I bet if you asked a Freedom of Information (FOI) question or three of Scotland's councils - along the following lines - you'd get a very interesting reply:
1 How many council staff have been allowed to leave in the 'interests of the efficiency of the service' in the past five years?
2 How much did this actually cost - in terms of added years and boosting people's pension benefits?
3 Of those who received enhanced pension benefits, how many earned more than £20,000 per year - and how many less than £20,000 per year?
Because the truth is that hardly any low paid workers are amongst those allowed to leave their council's service - on these generous, enhanced terms.
Such benefits are reserved for the higher paid groups - who already do much better than their low paid colleagues - from the final salary pension scheme.
Yet another illustration of how the local government pension scheme is a fine example of Robin Hood in Reverse - because the lower paid end up subsidising the much higher paid.
Here's a copy of the original post for information.
"Robin Hood in Reverse"
"The final salary pension schemes operated by Scotland's councils - are a fine example of Robin Hood in reverse.
Why? Because they take from the 'poor' and give to the 'rich'.
What happens is that low paid employees - end up subsidising much higher paid groups - including many senior and middle ranking officials.
In effect, the part-time cleaner is subsidising the lifestyle - of the council chief executive.
The system works in favour of senior council staff of all kinds - including many teachers.
Let's take an example to illustrate the point - a chief executive paid £150,000 a year - now the person doesn't actually work at that salary level throughout his or her council career.
But their pension is based on this final salary - even if they've only done the job for a relatively short time - as part of their overall service which can be a maximum of 40 years.
The pension scheme rules changed in April 2009, but for the great majority of employees (i.e. those in post before April 2009) - the maximum pension is still worth half of a person's annual salary - plus three times their annual pension as a tax free lump sum.
So, a chief executive on £150,000 and a maximum service would receive - £75,000 annual pension plus £225,000 as a tax free lump sum, i.e. 3 x £75,000.
The new post-April 2009 rules provide for an even bigger pension - worth two thirds of a person's final salary - 25% of which can be converted into a tax free lump sum.
But under both sets of benefits and rules - the reality is that other lower paid council workers (and other tax payers) - are helping to subsidise the scheme - for the benefit of the better paid staff.
Why? Because the higher paid take out much more than they pay in - over their working lives.
Meanwhile - at the other end of the pay ladder - the scheme is not so generous.
Because most low paid workers remain relatively low paid - by and large they don't have a career path - or many opportunities for promotion.
For most low paid workers - their pensions reflects what they pay in to the scheme over the years - because their pay rises only very slowly and mainly through an annual 'cost of living' pay increase.
Now what would be much fairer - and more progressive - is a scheme based on average salary.
So that people get back roughly what they put in over their working lives - this could even leave a bit of room to boost pension benefits - in favour of the lower paid.
The unions like to pretend they're on the side of the low paid when it comes to pensions - but in truth they're propping up a system that favours the relatively better paid.
Does this remind anyone of how the trade unions behaved over equal pay?"
Posted by Mark Irvine at 00:19
