Wednesday, September 03, 2008

“No Dividend Appropriation without Representation”

You don’t have to be raving loony left to get out of your tree at this recent report by the TUC “Pension Watch”.

They have found by examining the published accounts that the average top 100 directors of UK companies will look forward to a pension of £201,700 a year from pension pots that average £3 million each.

This is annual pensions, not salary.

The real issue is not just the size of these payments in itself (although many would disagree) to me the issue is that this is a stonking 25 times the average workplace pension that ordinary workers receive (£8,100 v. £201,700).

Not only that, while many large firms decide that they cannot “afford” to pay what is called “Defined Benefit” (or DB - pensions to its ordinary workers which are much less riskier and much fairer than the new “Defined Contribution” or DC), 76% of director schemes are still on safer “Defined Benefit” (DB)!

The shame gets even worse. Where you have directors on DC schemes, the top directors receive average pension contributions equivalent to 21% of their salaries, while the average for ordinary workers is only 6.5%. This unfairness is difficult (for me anyway) to really get your head around but remember that not only are the directors already paid far more than their average employees but the multiple that their pension contributions are paid is also far, far higher (unlike income tax?)

Finally, while we find that nearly all public and private pensions schemes for ordinary mortals now have a retirement age of 65, the majority of schemes allow directors to retire at 60!

This stinks! I can accept that there will always be in a capitalist society significant differentials in wages and benefits. But the scale of these differentials in pensions is just wrong and surely destructive. Do we really want to live in such a society where there is such blatant unfairness? Surely even those who do not believe in social justice will realise the drip, drip damage that such inequality will result in?

The irony is of course that the ordinary workers who get such a raw deal when compared to their directors are actually the real “owners” of these companies via their pensions and insurance policies. If these owners were able to exercise their rights of ownership would such abuses continue?

So do we need to dress up as native Indians, invade the London Stock exchange and then throw annual reports into Limehouse harbour under the call for “No Dividend Appropriation without Representation”?


Anonymous said...

Again with your East End ignorance, after your Isle of Dogs balls-up. It's Limehouse Basin.

Anyway what does the basin have to do with this?

Anonymous said...

hitting home with some people John

looking forward to
Labour's Pitbull with Lipstick !

comming soon

we can learn from Palin not about home life but how to square up to the tories

John Gray said...

Hi Anon 1
I don’t think many will know what you are going on about, - but once again if you fly over the Isle of Dogs from North to South and take a picture – all will be explained! I know it is a bit complicated, but never mind, you will get it eventually I am sure.
Secondly, I was perhaps trying to be just a little bit too clever about “Limehouse harbour” - so apologies if you do “not get it”. Maybe if you knew some history you would have realised that I technically should have referred to “Regent’s Canal Dock” not harbour, not basin.
Call it (bad) “poetic license”!

Hi Anon 2

Thanks for the support - Guess who I think is the current "Labour's Pitbull with Lipstick"

Anonymous said...

We already have pension apartheid in this country between those in local Governement and the rest of us who have to fund your lavish pensions. 5 million of you in final salary pension schemes that following Browns interventions are now closed to most of us in the Private sector. In 2007/08 the average private sector worker accrued only 2,650 pounds of benefit in their "defined scheme" compared to 5,800 pounds in the Local Government workers scheme? Considering I and many other tax payers are funding this you should re-condider your comment " the scale of this differential is just wrong and surely destructive. Do we really want to live in a society where there is such unblatant fairness. Independent analyst put the burden to the taxpayer of funding these Local Government pensions as high as 1 Trillion pounds! Well done Labour, very fair.

John Gray said...

Hi Anon
Don’t be so silly, the average LGPS pension is only £3,800 per year (not £200,000 pa ). Hardly very generous under any definition. The employee contribution level is not the problem in most LGPS schemes, the real issue has been pension holidays and gerrymandering by Tory boroughs who underfund their staff pensions in order to keep council tax low. So get your facts right and sort these Tory criminals out please.

Anonymous said...

"In order to keep council tax low"? Which councils have managed to keep there Coucil tax increases low? What is your definition of low? Where do you get 200,000 from? I thought you were an "expert on pensions"?

Tom Powdrill said...

" In 2007/08 the average private sector worker accrued only 2,650 pounds of benefit in their "defined scheme" compared to 5,800 pounds in the Local Government workers scheme?"

Do you have a source for this figure, as I am pretty certain it is ballax. According to the DWP's Pensioner Income Series (which is a standard reference for pensions income stats) the average occupational pension in payment is about £8,100 a year, meaning that the typical LGPS pension is well below average.

"Independent analyst put the burden to the taxpayer of funding these Local Government pensions as high as 1 Trillion pounds!"

then these 'independent analysts' must have been on the sauce, or you must have misunderstood the figures. over what period are you talking about funding the scheme to come up with £1 trillion?

even the right-wing nutters at the Taxpayers Alliance say employer contributions to the LGPS are under £5bn a year. so even if youy allow for inflation £1trn is going to be over a century of employer contributions.

perhaps you mean scheme liabilities? again your figure is bonkers. the entire assets of the scheme are only around £100bn to £150bn. even if you assumed that the scheme was only 75% funded overall (which it isn't, but just for the sake of argumemt), which is the minimum it is supposed to be, the liabilities would still only be a fifth of the figure you suggest.

where is this wonky info coming from?

Anonymous said...

Sorry you find it hard to understand Tom...

John Gray said...

Hi tom
Well done slapping down anon – tail between his legs and all that!

Anonymous said...

Which councils kept the council tax didn't give an answer? I guess that would be zero councils...and especially zero for labour run councils.

John Gray said...

Hi Anon
Later on something will be happening on this score. However, check out those councils who have had large LGPS pension deficits for decades, have up to 30 year repayment periods for paying off these deficits. The same councils who took maximum pension holidays, and always take the most optimistic projections about growth, inflation, bond rates and mortality...and yes most (not all) our Tory councils.

Anonymous said...

Good for them...I don't want my hard earned cash feather nesting the retirement pensions of the local council.

John Gray said...

Hi Anon

so we are agreed there is no feathering? How do you earn your lolly anon? do you really work hard? what as?