Britannia Radio

Does it take the threat of national bankruptcy to shame our 
disgusting MPs into doing what Is right .  At present those grossly 
exploiting their expenses are mainly Labour MPs but then there are 
MORE Labour MPs to start with than Tories so that doesn't mean much.  
But when it comes to the scandal of their pensions and those of 
public sector workers.  do we have to wait until the country is 
actually bankrupt and the IMF orders them to put their House in order?

I suppose it's too much to hope that there is somewhere in 
Westminster some MPs amongst whom  the notion of 'honour' is not 
entirely extinguished or will they ignore the example the Irish are 
setting them ?  (see end)

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TELEGRAPH    10.4.09
Pensions may be boring, but we ignore this scandal at our peril
MPs rely on our inertia to continue to line their pockets, argues 
Jeff Randall

  When pension companies start hacking back the pensions of their own 
employees, you can be sure that the whole system is in serious 
trouble. The United Kingdom's edifice of retirement funding, built on 
the sands of irresponsible Micawberism, is falling apart.

Corporate promises about financial security for senior citizens are 
being stuffed in the shredder. Unless, of course, you are the 
shredder - Sir Fred - whose payout continues to defy Agent Harman's 
court of public opinion.

Aon, a respected adviser to British business on pension issues, has 
said that it will cut the amount it pays into its staff's defined-
contribution scheme to "stay ahead of the curve" (see p1 of the 
Beginner's Guide To Management Mumbo-Jumbo).

What Aon really means is that it has found a way of reducing short-
term payroll costs without diminishing its employees' immediate take-
home pay. In effect, it's plundering the future of others to make its 
own ends meet today.

The company will get away with this because too few people in Britain 
understand or have an appetite for saving beyond lunchtime. Pensions 
are for old farts. They are boring. So who cares?

We have become a society that is addicted to borrowing and spending, 
scornful of deferred gratification. Until the credit crunch slapped a 
wet kipper in the face of over-stretched shoppers, the prevailing 
ethos was: see it, want it, buy it. Right here, right now was the 
only time-frame that mattered. Waiting was for weeds.

The evidence is clear: if something is not valued, few will complain 
if it is removed or greatly reduced. Aon's top team knows that had it 
cut salaries, there would have been uproar. Instead, it has sliced a 
chunk off workers' long-term savings and almost nobody is stirred. 
Grumpy trade union officials warn about pensioner poverty, but 
protests are muted.

And here's the acid test: how many of Aon's employees will respond to 
the reduction in the company's contribution by increasing their own 
monthly commitments? My guess is not many. Their pension pots will be 
left to wither. Worse still, where Aon leads, other companies seem 
sure to follow - in the exodus from pension provision. Defined-
benefit schemes are all but extinct; defined-contribution schemes are 
under attack.

Government has aided and abetted the decline of private pensions. 
Those who fell for Gordon Brown's declaration of an end to boom and 
bust saw no reason to save for a rainy day, because the sun would 
shine forever. Wouldn't it?

In addition, thanks to complex means testing, many low-paid people 
have no incentive to put by small amounts because even a piddling 
nest egg could disqualify them from claiming some benefits in 
retirement. Many people believe, with some justification, that the 
state will always bail them out.

And then there was Mr Brown's disgraceful tax raid on pension funds' 
dividends. Most independent advisers agree that this measure, 
introduced soon after he was given the keys to Number 11, has cost 
British pensioners at least £100 billion. That is like destroying the 
whole of BP - and then some.

The bursting of the housing bubble, the collapse of share prices and 
the evaporation of freely available cheap credit are reasserting the 
power of real-world economics over fantasy finance. The dream of 
using one's heavily mortgaged home as a cash-box has turned into the 
nightmare of negative equity, unaffordable debt and, in thousands of 
cases, repossession.

As long as homeowners thought that their houses and flats, through 
the magic of ever-rising property prices, would produce an abundance 
of easy money, there was little reason to reject riotous consumption 
in favour of virtuous saving. The madness of that self-delusion is 
now fully exposed.

Pensions are under mounting pressure, except in the parallel universe 
of the public sector. For, whereas many workers in private companies 
know they must spend less, save more and work beyond 65 in order to 
avoid hardship later on, they are starting to see that they must also 
pay higher taxes to make good the final-salary pensions of state 
workers whose schemes are largely unfunded - ie, their assets are 
insufficient to meet expected liabilities.

Nowhere is this more evident than in - brace yourself - MPs' 
pensions. On top of all their treats, including free bath plugs, 
chintzy lamps and Sky dishes, they benefit from a pension scheme, the 
generosity of which amazes many who are in it. One former MP told me: 
"I have a Westminster pension, which to be honest, given what I did 
to earn it, is not far short of a scandal."

The MPs' scheme is among the most lavish ever devised. It is paid for 
through modest contributions from members and a handsome top-up from 
the Treasury. Even so, the Financial Times discovered this week that, 
applying accounting standards used in the private sector, the MPs' 
fund has a shortfall of nearly £230 million.

For mere mortals, this would be worrying, raising the spectre of 
hardship in old age. No such concerns for MPs, however, because you 
and I are going to fill the hole. We will be compelled to shovel in 
more cash. No wonder the trustees are relaxed. Yes, not content with 
taxpayer-funded second homes, televisions the size of double duvets, 
and subscriptions to red-hot movies, parliamentarians will henceforth 
enjoy an increase in the exchequer's donation to their pension pots 
from 27 per cent to 32 per cent of an MP's salary.

It's tempting to say that this cannot go on. Unfortunately, it can - 
and probably will. The gravy train is being driven by its 
beneficiaries. Devoid of shame, they have no motive for unloading 
unseemly perquisites. The Prime Minister has ordered a review of MPs' 
pensions, which is due to report this year, but who really believes 
that meaningful cut-backs will be accepted?

Elsewhere in the public sector, other pension pots are even more 
dependent on taxpayer largesse. The numbers do not add up because 
members pay in too little, live longer than expected and the 
investment return from what is collected fails to bridge the gap. 
Urgent reform is required, but the Commons lacks moral authority to 
deal with the issue because, when it comes to pensions, MPs refuse to 
put their own House in order.

Well, that was my view until this week, when something extraordinary 
happened in Dublin. With his country's finances in an even bigger 
mess than the UK's, Ireland's finance minister, Brian Lenihan, 
announced to the Dail further cuts in TDs' (Irish MPs') pay and 
pensions.

He said: "Before we ask anyone else to give, we in this House and in 
this government must examine our own costs. Those of us in politics 
have been entrusted with a great privilege by the people. We must 
lead by example."
Sounds good to me. Over to you, Mr Darling.