Pension inequity fuels resentment

I HAVE read the Pensions Debate with interest and wanted to make my own contribution. I am a 64-year-old professional engineer, having worked for more than 40 years and paid into five separate pension setups.

As such I thought an examination of the outcomes might throw some light on the debate, and the conclusions which can be drawn. Now about to retire, these five give varying rewards, all of which reflect the current perilous financial world. In chronological order the five are:

• 1. The state old-age pension is to pay me about £320 per month.

• 2. I spent eight years with a local authority and this service gave me a £200 monthly pension at 60 which more or less matched my monthly council tax demand four years ago when I turned 60. Now, four years later, the pension has risen to £230 with council tax at £286. Over this same period my local library opens less often, my grandson's nursery has closed and litter collects in unrepaired potholes. The situation, I understand, is partly brought about by the £3bn shortfall in local government pension funds – money goes to pensions at the detriment of services.

• 3. For the next 20 years I worked abroad with 25% gratuity paid in lieu of pension paid by my employer. Aware that I must address pension provision, I moved roughly 15% to 17% into various low to medium-risk unit trusts with investments spread across UK, North America, Asia and Europe. These have dropped by between 30% and 40% over the past year because of low share values. The spread of my funds more or less matches my local authority pension investments – low to medium risk. But as we know, the local authority shortfalls are being underwritten by council tax payers.

• 4. The next four years were with a consultant, where I enjoyed a final salary scheme. This will give me approximately £97 per month, less tax, when I reach 65.

• 5. My last eight years have been spent working with another consultant, where the final salary pension was closed to newcomers just before I joined. I was placed in a money purchase arrangement with both employer and myself contributing 7.5% of my salary (15% combined), with investments in low-risk UK equities, cash and bonds. This will give me about £108 per month less tax.

An aspect of working with colleagues, some on the final salary arrangement and with increasing numbers like me outwith, is knowing that a proportion of the company's profits – profits we all help generate – are being used to shore up the final salary beneficiaries.

This has led to less spend on marketing, technology and research, with growing resentment that those retired and about to retire on the final salary pension receive overgenerous payouts which could lead to jeopardising the firm's future.

This last point, I find, is never aired in financial articles. Being a cynic, I wonder if the so-called experts, the senior actuaries, accountants and academics, are all safely embedded in their final salary schemes. If so, why draw attention, why risk jeopardising their golden goose by debating this growing groundswell of resentment of the more junior members of their schemes who again are underwriting costs?

Turning to the moral compass debate, I, like most with private sector employers, signed a contract with a caveat that I would do nothing that would bring the firm into disrepute. This I have complied with, but am getting increasingly angry that private and public sector people get off when something has gone wrong on their watch. Recent examples include RBS's Sir Fred Goodwin, NHS trust chiefs who've more or less bankrupted their organisations, an MSP who went to jail for lighting fires and many more who have walked away with a nice golden handshake. Is it reasonable that they escape totally scot-free?

Finally, with public and final salary pensions over-generously structured over past decades, the next generation is now facing paying for the 'sins of their fathers'. This coupled with the double whammy of the scot-free escapees is leading to a build-up of resentment.

So how might this resentment be addressed? No one needs a pension in excess of £3,000 per month to achieve a reasonable quality of life. If that person has brought disrepute on their watch, this £3,000 bar should be suggested as a way to alleviate their guilty conscience. I and many others would get delight in seeing the greedy blighters getting a bit of comeuppance for their abuse of trust.

James O'Neill is a Scotland on Sunday reader

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