Consultation on taxpayer-funded pensions for councillors

The Department for Communities and Local Government (DCLG) has launched a consultation into councillor access to the local government pension scheme.

I’ve ‘googled’ pensions for councillors and found

In Surrey Heath, to my knowledge, no councillors are members of the LGPS. Staff of Surrey Heath Borough Council are members of the Surrey County Council Pension Fund, councillors are not members of this scheme. Surrey Heath councillors do not receive a council pension, which is an excellent state of affairs.

I don’t agree with councillors being members of any council pension scheme. Councillors are not full-time politicians or salaried town hall staff. Councillors volunteer to serve their communities, for which they get an allowance. It is not a salary. As it says in the Background section of the consultation document, “The public seem generally surprised that councillors are receiving taxpayer-funded pensions at all”. I think that’s true.

If councillors want to build a pension from the money they get in allowances, then that’s their choice. I believe that if a councillor, or any locally elected official, when removed from office in an election, the public should understand that their taxes no longer support them. The government are looking to limit access by elected individuals to the LGPS from April 2014.

The consultation offers a number of options. To make your views known email them to

Our pension un-preparedness

Prompted by The state of our pensions – in graphs, in Citywire, the state of our pension preparedness looks truly dreadful, and not something that’s likely to improve in the current economic climate.

In one of the graphs, four out of six estimates of the underfunding of public sector pensions put the liability at over £1 trillion. I’ve commented before of the crisis in public sector pensions. We need a longish period of growth in our economy, which will do two things, firstly improve the asset values in the things in which our pensions are invested, and also provide greater tax revenues from which we can plug the holes in our pension underfunding. A tall order, with countries collapsing around us.

[Future] Cut of the day 11: Public sector pensions

Readers here may have read my posts over the years on the pensions crisis facing this country, most recently HERE. It’s pleasing that this issue is being addressed sensibly, as shown in the interim report of the Independent Public Service Pensions Commission.

One of the issues that has troubled me is the unaffordability of those at the top of the public sector pay scales and their pensions.

To illustrate another of the problems, that we are all thankfully living longer, I’ve captured a graph from the report that illustrates the problem perfectly. 

I think we’re all going to have to pay more for our pensions. That seems to be a preferable choice to cutting the pension. I’ll come back to this topic when I’ve read the report and considered its recommendations.

UPDATE: Those good fellows at Citiwire has a neat summary of the Interim Report – 10 public sector pension myths busted by the Hutton review. It’s good to see tha they report on the review’s which says high flyers do best, writing, “Final salary schemes primarily reward high earners which is why Hutton has described them as ‘fundamentally unfair’”. Totally agree.

Stephanie explains the public sector pension problem

Stephanie Flanders, the BBC’s economics editor, has that rare skill to convey complex argument in a simple way.

So it is with her blog post – The public-sector pension gap. I’ve only had the chance to skim read the contents of the Public Sector Pension Commission’s report. So it’s thanks to Stephanie’s article that the dilemma of public sector pension funding is presented clearly.

It’s this. While interest rates are low, and asset prices depressed, the amount needed to be put into a pension scheme needs to be increased to meet the expected pension at retirement.

The public sector’s pension pot, which in this case as Stephanie rightly points out doesn’t include local government, is unfunded and is drawn from the taxes collected. The government experiences the same asset prices and interest rates as the private sector. It’s just that the hole in public sector pensions can only be met by taking an increasing amount of the total amount of tax collected.

That’s the crisis. So it’s right to question the affordability of paying, for example, senior police officers, who on retiring at 49, claim an annual pension of variously £80k, or £110k.

Public sector pensions crisis worse than thought

Dear Reader, I image you’ll know how exercised I am by the iniquities of public sector pensions versus private sector pension provision.

If you need a recap on my views and some of the useful ideas on how to resolve the situation then take a look at; Three pension crises – Feb 2009Shocking disparity -Apr 2009; and finally Don’t forget the pensions crisis – Apr 2010.

 Well, well. It appears that the crisis is worse than first thought. What comes after crisis – catastrophe perhaps.

An independent commission – Public Sector Pensions Commission – has looked at the affordability of public sector pension provision and, guess what, has found a dramatic under provision, according to their report released today.

You can read the Commission’s report, but a shorter synopsis, from the Chairman of the Commission, can be found HERE

If pensions are a worry to you. I recommend Paul Hogarth and Steve Bee’s website – jargonfreepensions.

BBC pensions face the axe, and maybe Robert Peston too

The BBC is facing a £2 billion hole in its pension scheme, and is proposing to cut staff pension benefits to stop the pension deficit getting larger, and vas a means of eradicating the deficit.

The BBC’s business editor, Robert Peston, has commented at length about the supposed iniquity of the cuts. I think he’s on rocky ground, when he says,

“The value of any previously earned pension is currently increased every year by RPI inflation plus 2%.”

That seems to me to be very generous, and probably unaffordable, which is why the BBC are looking to change it. Especially as the pension scheme is surely backed by the Treasury, and that means our taxes.

I’d lay pretty short odds on Robert Peston’s career facing similar cuts to that of the staff pension.

Public sector pensions crisis recap

The cost of public sector pensions remains a hot political topic, with the deputy prime minister, Nick Clegg, saying that they are ‘unfair and unaffordable’. Even one of my favourite news sources, Citywire, is reporting on the options facing the government.

Rather than repeat myself, my post on the public sector pensions crisis in April, included lots of links to sensible comments on the topic, and also some ideas on how to resolve the situation. Worth a look if the pension crisis interests you.

Yes, even more information on pensions

In my email inbox today is an excellent table of political parties proposals on pensions from CitywireWhat each political party would do with pensions. This isn’t about public sector pensions, it’s about proposals on state-funded and private pensions.

Don’t forget the public sector pension crisis

The daily media agenda in this election campaign means an issue crops up, makes a brief impact, and then it’s gone. One such issue is the public sector pension crisis.  Here are some details on this issue for you to ponder on. Facts first:

You might think there aren’t too many ideas to fix the problem. Well I’ve spotted these sensible sounding ideas.

  • Raising the pension age by three months every year says the IEA 
  • The Confederation of British Industry’s 16 page report, Getting a Grip, is full of good suggestions

In Surrey Heath, I think I’m right in saying, operates a funded scheme with other Surrey councils, and for last year employer pension contributions were in total just under 19% of council tax. Just a reminder that it’s our taxes pay that for public sector pensions, and all the other taxes we pay go towards the unfunded public sector pensions.

Don’t want to give you the collywobbles, but the old age pension is also unfunded, meaning taxes paid today pay for pension today. If at the creation of the welfare state we’d created a fund into which people paid money, and then to draw on that fund in retirement, then we wouldn’t be in this pickle now.

The shocking disparity in pensions between public & private sectors

Sir Fred Goodwin’s pension rightly caused irritation among the populace. Today, the shocking, and glaring, differences in pension entitlement’s can be seen in sharp focus.

Bob Quick, of serious security lapse fame, is apparently set for an annual pension of £110,000 at the age of 49.

Meanwhile insurance giant Aon Consulting is cutting the amount it pays into its defined contribution employee pension scheme. Tony Bonsignore in Citywire provides a detailed description of Aon’s actions, and sees this as an increasing trend, saying:

“Just as private sector final salary schemes are now largely a thing of the past, so generous employer-funded occupational DC [defined contribution] schemes may soon become a thing of rare beauty.”

The Financial Times also reports on the problems today’s working generation will have in funding an acceptable retirement.

It’s surely time to review the overly generous public sector pension provision. Assuming Bob Quick lives for 30 years, his total pension, excluding increases, will be £3.3 million. A lot less than the basic state pension for the same period of  around £156,000.