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End pensions apartheid

Ed Bowsher
by Lovemoney Staff Ed Bowsher on 18 November 2010  |  Comments 2 comments

Let's end discrimination against ordinary staff!

I've just belatedly read an article on pensions by my friend Cliff D'Arcy. It was published in September so I really should have read it earlier but that's by the by.  It's the last couple of paragraphs that really hit home for me. Here's what Cliff said:

"Finally, can I suggest one easy way to end this unfair two-tier pension divide?

"The coalition government should introduce legislation in the next Budget or Finance Bill to end pension apartheid. In other words, I want a law which forces all directors and employees of a company to belong to the same pension scheme and accrue identical benefits.

"This may well be the only way to stop greedy directors from pumping up their own pensions while destroying their workers' retirement dreams!"

This is a brilliant idea. To be clear, I'm happy that someone who earns £500,000 a year ends up with a larger pension than someone who is earning £25,000. It's just that if the boss has a final salary scheme, so should all the employees. Or if the company pays 5% of the boss's salary into a defined contribution pension fund, it should pay 5% of other employees' salaries too.

Can anyone argue against that?

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Comments (2)

  • emiliolargo
    Love rating 0
    emiliolargo said

    Totally agree with this in principle but it should not mean that new directors should be entitled to enter a closed final salary scheme.

    We had the situation in my company last year where 6 of the 8 directors were not in the final salary scheme as it was closed to new members years ago. The final salary scheme was then closed at the end of last year for future accruals to exisitng members resulting in a £1.5m P&L benefit for the company. This meant that the 6 directors got paid their 50% bonuses (for reaching the profit target) as a result of closing the scheme but they did not lose out on the final salary pension benefit as they did not have it in the first place.

    I would suggest that any immediate P&L benefit for closing a final salary sheme should be paid into the final salary pension pot and not reward those who have an interest in closing a scheme that does not benefit them.

    Report on 21 November 2010  |  Love thisLove  0 loves
  • Yorkstyke
    Love rating 71
    Yorkstyke said

    Whilst I totally agree with your article Ed, the real pensions apartheid is the subsidising of public sector pensions by private sector employees through taxation in it's various forms.

    Report on 22 November 2010  |  Love thisLove  0 loves

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