Leave Fred's Pension Alone!

Picture the scene.  “Hey, Tone.  Many of of us don’t like the mess you left the country in, so you’re losing your PM’s pension.”  “Maggie.  Loads of your humble citizens think you wrecked the country when you were in charge.  Say adieu to your pension.  Oh, and by the way, you’ll have to pay back half of what you’ve received already.”  “Johnny Boy.  We can’t forgive you for the ERM fiasco.  No more pension goodies for you, my friend, but don't worry, you're not alone.  We've cancelled the pensions for everyone in that Parliament anyway because enough of us think you were all crap.”  “Gordon.  As the man who got us into this mess, you don’t seriously think you’re going to get a cent from us when you’ve gone, do you?”

Quite a few banking ex-colleagues were bank managers, lending money - no doubt lots of it during their careers.  I have a relative now in his 80’s and a bank pensioner, who was a lending manager.  Maybe we should stop their pensions and claw back what they’ve been paid already, because they probably had some loans that went bad during their time as a bank manager and therefore lost money for their respective institiutions….

Could my ex-employer maybe come to me at some point and say: “We’ve been looking back, and we reckon that because of mistake x, sometime in the past, we’re not going to pay your preserved pension – ever.”  I’d be gutted and so would you, if that happened.

What I’m trying to say is that, unlike salary and bonuses (and maybe some other perks) we can’t go round subjecting pension payouts to some form of performance measurement.  What you built up in your pension pot should be allowed to stay there, and that means that you get the benefits when they fall due.  Once it's there, it's there and can't be taken away.  To do anything else kills the pensions industry and makes it pretty undesirable to take out a pension at all.

I know, in the current highly topical case, that the numbers are extreme, but all this hooha about cancelling his pension establishes a precedent, and where would that stop in reality?  There are loads of bank execs now and in the past that either have pensions, or are building up big pensions.  Are we going to cancel them because of the mess that the banking industry is in?  What about the execs in charge of other companies that go to the wall, or suffer big losses, now and in the future, after they’ve retired?  And, by the way, I suspect that despite what the politicians say, the cost of his pension is a matter for the RBS pension fund, not RBS.  I imagine that it is costing the taxpayer little money, if any, as that pot was contributed to out of income earned by the bank over the years before the taxpayer bought most of the bank.

Hands up how many people are disgusted that, although their own final salary schemes are probably dead, politicians are still getting theirs?  What is worse is that they only have to serve a few years before they get a generous percentage of their salary paid as a pension.  Even when we had final salary pensions in private industry, you had to work 40 years to get 2/3rds of your salary in pensions – why do politicians get theirs so soon?  Should we subject their entitlements to a vote on their effectiveness when they retire?  Talk about double standards...

What gets me too is that you only have to look in the report and accounts of the banks (and probably other large PLCs) to see just how much money is being put in big nobs’ pension funds.  This is not a surprise – and certainly shouldn’t be to those who regulate industry, so there is a heavy dose of populism going on here.  Should we stop all such arrangements for top execs now?

If the payment of a pension, built up over decades, can be put at risk because of some perceived performance issue sometime in the past, perhaps in the last couple of years of employment, or even something that emerged after you’ve gone, then what’s the point of having a pension plan in the first instance?  It would be no less than a lottery and quite possibly a waste of time for large numbers of people.

If people have a problem with these numbers, something must be put in place to prevent anyone from building up that kind of a pot in the future (though leaving politicians to decide what is reasonable for us all is a bit too Socialist for me).

We need to be careful where this leads us.  We might all find that the endgame is pretty hard on us, too.