Are you one of the lucky ones to be in receipt of a gold plated pension this year?
The Times reported recently on the disparity of pension provision and in particular the position of very senior civil servants who have amassed pension packages worth more than £1 million.
Traditionally those working in the public sector have not been the recipients of high earnings. These were the fruits of the top earners who remain working in the private sector.” Banking, finance and professional services are where the really serious money is to be made”.
So, why the outrage about those being paid high salaries in the City? At least their salaries are not met by the taxpayer.
The author asks, “Is there any risk for the public bureaucrats?” Perhaps we have misunderstood or simply don’t value what they do. Whatever the answer, the consensus seems to be that most senior public servants are generally paid less than their private sector counterparts. This is largely because their pensions form part of their remuneration package.
Why are pension payments of interest to us?
When people come into mediate surrounding a marriage breaking down, if they are looking at negotiating a financial settlement, it is important that all information about pension provision is available for sharing and so that fair decisions can be made. It is strange how little people seem to know or even want to understand about where their money is placed in a pension. The court does need to know about a pension as this will often form either the largest or possibly the second largest asset of a marriage.
Pensions are regarded as part of civil service remuneration packages simply because they are gold plated.
We have recently been exposed to the shocking stories surrounding the sums paid to vice- chancellors of some universities, some of whom command salaries in excess of £400,000 per year. Also, of very senior civil servants who have amassed pension packages worth more than £1 million.
Relative to this we are informed that the university pension scheme has built up a £175 billion deficit. Questions have to be put including “How will this deficit be met? Will it come from the students, taxpayers or university employees?”
There are changes ahead because pension fund administrators have to work out pension provision taking into account changes to life expectancy and increases in liabilities. These considerations will surely affect future payment of the state pension.
Too many people who I meet in mediation are blinded by the complexity of their own pensions and appear to have little relevant information at a time when they need to work out what capital and income provision they have put aside for their retirement, whenever that might arise.
In past years many people had defined benefit occupational pension schemes which guarantee an index-linked salary-related pension from retirement until death. It is rare to find a private sector organisation that has found these schemes affordable to continue and most have closed.
I read that in order to invest in a pension worth the package to a parliamentary secretary would cost around £3 million to buy. The return would be in the region of an annual pension of £85,000 a year plus a lump sum of £245,000. These are the truly gold-plated pensions and that come with amazing tax breaks.
The inconsistency will no doubt need to be addressed in the future in light of tax-advantaged wealth accumulation being frowned upon.
So much change has occurred with people not being able to claim their pensions until their late 60s. Why then are civil servants still getting full pensions from age 60?
My want is to try and understand the disparities in the pension administration system to help people to understand within mediation how their own pensions actually work and importantly when they will receive them. Within mediation we are able to signpost people to seek information to help them arrive at safe decisions based upon relevant and clear information which in turn offers fairness at a difficult time when people are expected to make important decisions about their future and the best route to take.
These and other important decisions may be taken within the mediation process so that fairness and trust are achieved.
Please contact Tricia Muzalewski, Accredited FMC and Law Society Family Mediator at Wynn Mediation. Contact details: email@example.com or telephone on 01702 341241
PMM December 2017