Saturday, December 24, 2005

Pensive on pensions

John Hemming has decided that Labour is to blame for the demise of the company final salary pension scheme (known as a defined benefits scheme, because you know what the outcome will be).

Conveniently, he ignores the role of those company bosses who happily used Tory legislation to stop making company contributions into those pension funds - confident that the market would sustain the growth and that the savings on these pension holidays were better in the company coffers than in supporting their workers. Companies could (and did) cream off any surplus not required to support the number of pensioners at risk.

Then the market crashed and stabilised - the huge growth disappeared and the same bosses were faced with the choice of making increased contributions to cover the risk or abandoning the workers to the vagaries of the market. It doesn't take a genius to work out where they went with that decision. Note that the directors of these companies typically retain final-salary schemes for their own pay grades, showing scant regard for the future of their scheme.

John also criticises the recent increase in the levy funding the Pensions Protection Fund. Without the PPF, those thousands of employees who lost their jobs when Rover ran out of road this year would have seen nothing of their pensions. Naturally, John's former best friends - the ones who actually drove Rover into bankruptcy would have been left with their millions.

Of course, as John himself said when he wasn't hoping we'd forget his involvement in setting the whole thing up, a Liberal Democrat government would have kept Rover going for a whole extra month. The Liberal Democrat government wouldn't have had anything in place to protect the pensions, though.


john said...

I continue to believe that it would have been possible to pull off a deal which would have prevented administration. I have seen no evidence that this is not the case.

That would have meant the company continuing to trade although there would have been some redundancies.

It remains, however, that the government went for the easy target twice on pensions. We insure redundancy payments and payments in lieu of notice centrally. Why not pensions payments?

I do accept the point on directors keeping such schemes for themselves whilst going to defined contributions for the staff.

I also accept the point that there had been pensions holidays in some companies that assisted in causing difficulties.

Bob Piper said...

I thought it was most amusing watching John Hemming do a Pontius Pilate on his former buddies at Rover. Unfortunately, the Rover workers weren't laughing and the 'man who saved Rover' kept a safe distance between him and them.