Pension Inequity
UK Politicians and Bureaucrats look after themselves - very well indeed

The British State Retirement Pension was 100 years old on the 1st of August this year, 2009.


POLITICIANS

Politicians always look after themselves very well. They believe in the greatest amount of good for the greatest number - but the greatest number is "Number 1".

British MPs enjoy a very generous pension, payable from age 65, based on the number of years they have been in Parliament, and on their final salary.

It is a fully indexed pension. It is more generous than the pension paid to retired civil servants, except that it starts at 65 and not at 60.

Prior to 2002 the accrual rate was 1/50th for each year of service. This is better than the Civil Service scheme, which has an accrual rate of 1/60th. But the MPs voted themselves an increase, so that the accrual rate is 1/40th; this is an increase of 20%.

So why should MPs have their pension scheme enhanced when everyone else is having theirs reduced? Why? Because they CAN -- THEY make the rules and THEY can do what they damn well like. They have no shame. And what adds insult to injury is that WE have to pay for it. Doesn't it make you proud to be British?

CIVIL SERVANTS

Civil Servants and other functionaries have very generous pensions. The pension is determined by "Defined Benefit" rules, with 1/60th of salary for each year of service. The salary used is the average salary during the period approaching retirement.

They are allowed to convert 25% (one quarter) of the pension into a lump sum, which many take to buy a new car or renovate their house.

The normal retirement age is 60, and they have been striking, or threatening to go on strike, in protest against a government proposal to raise their retirement age to 65. Meanwhile they make no noise about the proposal to raise State Retirement Pension age from 65 to 68.

In addition to these privileges, if they retire to a "frozen" country no part of their occupational pension is frozen, unlike their colleagues in the private sector.
(Note: regarding the Guaranteed Minimum Pension - GMP - element of their pensions)

PRIVATE SECTOR PENSIONS

Company pension schemes can look very generous. Your employer pays in, and when you retire you get a pension that rewards you for years of faithful service.

One type of scheme is called a "defined Benefit" (DB) scheme. Typically the pension depends on the number of years you have been in, and the salary you were getting at or near retirement. This is often called a "final salary scheme".

The other main type is called a "Defined Contribution" (DC) scheme. The pension you get depends on the contributions put in over the years and the success or otherwise of the investment of your money.

In recent times, companies have found that DB schemes put a big strain on profits, for several reasons:

Rapid increase in salaries. Pensioners living longer. Inflation. Losses on the stock market.

As a result, many DB schemes have been closed and converted into DC schemes with lower prospective pensions.

But even with these, your pension is not safe. There have been many cases where the company winds up, leaving the pension fund unprotected, and even cases where company management have misappropriated pension fund money.

By the way, if you have an occupational pension and retire to a "frozen" country, it is possible that part of your occupational pension will be frozen by the state, and only the balance of your pension will be indexed each year. Your state pension will, of course, be wholly frozen.