Robin Hood in Reverse
As the pensions aspect of equal pay begins to heat up in in North Lanarkshire, I thought it might be helpful to publish a few posts from the blog site archive on the subject.
The pensions rules changed recently after a long and pointless strike, but the changes only affect 'new starters' if I remember correctly, so while the system is now generally fairer to the taxpayer, the highest paid public officials still get to retire on hugely favourable terms compared to their lower paid colleagues.
Robin Hood in Reverse (13/11/13)
After months and years of protests and strikes, the trade unions in Scotland have finally come to their senses - by accepting the principle of career average pension schemes which are much fairer than the old final salary arrangements.
But what a palaver over an issue that has been as plain as the nose on your face ever since this dispute began - why should the low paid subsidise the pensions of the much higher paid?
I wrote on the subject back in 2010 and pointed out that under a 'final salary' scheme low paid council cleaners were helping to pay for the pension of their council's chief executive.
Here's a previous post from the blog site archive which explains the background to this dispute which has been running for three long years when it should, in fact, have been settled a long time ago.
For the Few - Not the Many (7 October 2010)
Former Labour Minister - John Hutton - today sounded the death knell for final salary pensions schemes - proposing instead that pensions should be based on a career average earnings.
In other words - that people get back out of the pension scheme - broadly what they put in during the course of their working lives.
Who could argue with that because it's a much fairer sytem than the one we have just now - where low paid council workers effectively subsidise the big pension pots of their bosses and senior managers.
I wrote about this back in June 2010 - here's what I had to say then about 'Robin Hood in Reverse' - so it's good to see that public policy makers are finally grasping the nettle.
By the way, elected councillors in Scotland now have access to the local government pension scheme - and that's on the basis of career average earnings.
So why should senior council staff be any different?
Robin Hood in Reverse (2010)
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?
In other words - that people get back out of the pension scheme - broadly what they put in during the course of their working lives.
Who could argue with that because it's a much fairer sytem than the one we have just now - where low paid council workers effectively subsidise the big pension pots of their bosses and senior managers.
I wrote about this back in June 2010 - here's what I had to say then about 'Robin Hood in Reverse' - so it's good to see that public policy makers are finally grasping the nettle.
By the way, elected councillors in Scotland now have access to the local government pension scheme - and that's on the basis of career average earnings.
So why should senior council staff be any different?
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?
