Incompetence and Ignorance Over Pension

There is mucho incompetence over the pension issue that is in the Press at present.

Our politicians are jumping on the bandwagon and either don't understand the issues, or are playing dumb for their own ends, and it's not very edifying to see this happen.

The truth is that, in the RBS pension scheme, anyone who leaves is entitled to claim their pension at 50.  That pension is calculated based on number of years service and their final salary.  If they leave after the age of 50, they generally get their pension undiscounted.  This is what has happened in the case of Fred Goodwin.  It's a rule of the pension scheme that has been there for a very long time, and has in the past enabled a number of people, at all levels, to leave the bank with some degree of income to enable them to get by, as an alternative to redundancy.  I expect that, when an early retirement takes place, the bank has to put more money into the scheme to cover the additional years that it is likely to have to pay out, which is what will have happened in this case.

Of course, in this case the numbers are extreme, which is a function of the fact that he was on such a large income in the first instance.  But the principal has been followed, nevertheless, and in that regard there seems to be nothing wrong with the process in this instance.  When this was all agreed, and allegedly assented to by the Government's representative, it doesn't seem to me to be that secretive, because the normal rules were followed and therefore I don't see how the Government can claim to have been misled.  It is therefore a bit disingenuous for the Government to be calling foul here, when it could have done something about the whole thing at the time by asking some pointed questions.  Let us also remember that the taxpayer did not control the bank at that point.

Of course, the process outlined above could have been interrupted and varied but I think that would have set a dangerous precedent for future retirees within the bank - unless someone made it a bomb-proof exception.  One complicating factor would be if the pension pot included any elements earned whilst in employment with another, previous organisation, and there is also the issue about whether the penalty applies to the entire time in employment with RBS - is that equitable?

Also, as I mentioned in an earlier blog, I do think it is dangerous to make pensions dependent on performance.  We can't have someone's life work in terms of a pension be taken away at the last minute because of some performance issue, perceived or otherwise.

Whilst we're at it, the pension arrangements of all other corporate execs should be examined.  What's bad for RBS is presumably bad for all other corporates and I bet you'll find similar arrangements, and values, in many of them too.  What are we going to do about those - especially as they aren't taxpayer-owned?

Finally, a couple of things that have emerged show how ignorant and duplicitous our politicians are with regard to pensions. 

Firstly, Fred was berated at the TSC for the fact that the fate of his pension is not linked to share prices.  This is a bit rich coming from politicians whose own pensions are cast-iron guaranteed and are funded out of our taxes, come what may.  Talk about kettle calling pot black.

Then we have the unedifying spectacle of our ex-deputy prime minister calling for the pension to be stopped unilaterally, and only restored if Fred can successfully sue.  Bring it on, I say.  Whilst we're at it, we can stop the pension of John Prescott, Tony Blair, John Major and all other politicians, because a significant proportion of the population probably think that each and every one screwed up somewhere along the line.  They can sue if they want it back.  What kind of a society will we have if we allow such a state of affairs to become the norm?  That rather flies in the face of our legal system, which presumes people to be innocent until proven guilty.  Presumably, our ex-deputy prime minister thinks that concept outdated... It also undermines the status of all contracts, if they can be unilaterally torn up in this way. 

Chaos rules KO, or what?