Tuesday 22 October 2002

The pensions rip off

There is an excellent article in today's Daily Mail (no link) by city editor Alex Brummer. Much has appeared in the newspapers recently about the problems facing those of us with private sector pensions. Final salary schemes are being withdrawn and annuity rates are falling continuously. One of Gordon Brown's first acts was to hit private pension funds with a £5 billion tax increase. Now, there is talk of taxation of lump sum withdrawals from pension funds which are currently tax free and a reduction of tax relief on contributions. Brummer says that the real pension scandal is the vast amount being paid to state pensioners. I agree.

He gives the example of a not-too-high-up NHS consultant retiring on £45,000 per year. The cost to the taxpayer (excluding prospective inflation) would be £1,400,000. A teacher can expect to receive some £800,000.

Elsewhere in the Mail, I read that firefighters benefit from an employer pension contribution of 22% on top of their salary. That means that a firefighter with five year's service gets a package actually worth £26,268 pa and not the £21,531 pa which is bandied about. The claimed increase would take the total package up to £36,600. To retire on £20,000 pa (2/3 of the claimed basic salary) would require a pension fund of about £560,000 for a 50 year old firefighter. How many private sector workers in jobs requiring no academic or professional qualifications can save over half a million pounds by the age of fifty?

I hope that Brummer and the Daily Mail continue this campaign for pension justice. We certainly can't expect anything from Conservative MPs. They've got their own snouts in the pension trough.