The Hon Member for DeadBadgerShire has written to me again

Once it became known that Keith Vaz MP had secured a Parliamentary debate for tomorrow (28th November) in relation to proposed changes to the Police Pension Scheme, I, like many others I suspect, wrote to my MP and asked him to support to the motion.

Now this MP has always been very good at responding to my letters, e-mails etc so I anticipated that this would be no different.

Yet again his secretary asked me for my address in order that he may respond and I waited anxiously and excitedly for the postperson to arrive.  Well today the postperson duly arrived with not one but two letters addressed to me from the House of Commons.  With mounting anticipation I tore open the envelopes and devoured the contents.  Both letters were from my MP.  Both letters were written on the same date.  Both letters were posted on the same date, but no, both letters could not be placed in the same envelope and save on postage costs.

One of the letters was about an entirely different subject, but then I saw his reply to my questions regarding the debate on Police Pensions.  My excitement and nervousness mounted in equal measure. I gingerly unfolded the letter and read the contents several times, to ensure that I had understood them correctly.

It is fair to say that I was so moved by this letter that a little tear formed in the corner of my eye and rolled, unchecked, down my cheek.  I was so moved that I thought I would immediately share the news with you all, so here it is, reproduced below, a faithful copy of that wonderful, momentous letter from the Hon Member for DeadBadgerShire;

Letter from Hon Member for DeadBadgerShire

I’m sure that having read it you will all share my excitement and confidence that a just outcome will be reached tomorrow.

Pensions – Are We Being Misled?

Well, I couldn’t say ‘lied to’ could I?

Mrs Theresa May, Home Secretary Extraordinaire, said to you all “In common with the reforms that are being developed across public service pension schemes, the Government is committed to ensuring that police pensions are affordable and sustainable for the future. Let me reinforce that police officers should, and will continue to, have access to pension arrangements that are among the very best available.”  Well I’m a cynical old so-and-so who doesn’t always believe what I’m told.

I’m going to start this blog with a confession:-  I am no expert on pensions, Police or otherwise.  I think that I am of average intelligence but some of the material that is published around pensions blows my mind and I can’t always be certain that I’ve understood.  I have not seen any illustrations of how Pension Scheme A compares against B, C and D for example.  They may exist but I haven’t seen them.  Maybe I should just believe what Mrs May says, she’s honourable, she wouldn’t speak an untruth, would she?

So I sat down and had a chat with my old mate Google to have a look at what is available out there in other public sector pension schemes, to see how they compare, and do you really have one ofg the very best pensions available.

The first thing I discovered is that I really don’t understand the new Police Pension Scheme, or at least I defy anyone who doesn’t have access to their payroll computer, or kept every single payslip for their entire career, to calculate what their pension will be.  I will have to quote from the Q&A document recently issued by the Federation:-

20. How does the career average work in practice?
Take a member earning £29,000 in year 1, £30,000 in year 2 and £31,000 in year 3 with CPI at 2%, the pension being earned would be as follows:
 In Year 1 1/55.3 x £29,000 = £524.42
 In Year 2 1/55.3 x £30,000 = £542.50
 In Year 3 1/55.3 x £31,000 = £560.58
By the end of year 3 the pension entitlement would be:
 £524.42 x 1.0325 x 1.0325 = £559.07
 £542.50 x 1.0325 = £560.14
 £560.58 = £560.58
Total = £1670.79

The figure of 1.0325 is used to increase the slice by CPI (in this case assumed to be 2%) + 1.25%, which gives a total of 3.25%.
That process continues throughout pensionable service. The final pension is the total of all the slices added together, that amount is payable as the annual pension (subject to an option to commute for a lump sum).

I can just about keep up and follow that, but I’m damned if I could work out my likely pension from it.

Anyway, I chose to compare the Civil Service Pension Scheme, Local Government Pension Scheme and MPs Pension Scheme.

Most new entrants to the Civil Service Pension Scheme are enrolled into the Nuvos scheme.  Nuvos is a Career Average Scheme.  Contributions for someone earning £30k – £50k p.a. are 5.1%, due to rise by 3.2% over the next 3 years.  If I have interpreted it correctly the accrual rate is 2.3% , or 1/43.5th Applying this accrual rate to the Federation’s calculations above should give us something like this.

 In Year 1 1/43.5 x £29,000 = £667
 In Year 2 1/43.5 x £30,000 = £690
 In Year 3 1/43.5 x £31,000 = £713

The next part of their calculation completely blows my mind so I’m not even going to attempt it, but it seems to me that the Civil Service Nuvos Scheme provides a better return on your (lower) contributions over the same period of time, although I do accept that there are other features of that scheme which are different and maybe not as favourable.

Next, the Local Government Pension Scheme.

In 2014 the Local Government Pension Scheme will change to a Career Average Scheme.  Contributions for someone earning between £34k and £43k p.a. will be 6.3%, and for someone earning between £43,001 and £60k p.a. will be 8.5%.  The accrual rate is 1/49th.

So, going back to the calculation above

In Year 1 1/49 x £29,000 = £591
 In Year 2 1/49 x £30,000 = £690
 In Year 3 1/49 x £31,000 = £632

Still slightly better than the Police Scheme when it comes to accrual of pension, still significantly cheaper contributions, but again, I must warn that the Police Scheme may well have other benefits that these two schemes don’t have.

Now, if you’re sitting comfortably, I’ll move on to MPs Pensions, recently subject of a reform by Francis Maude MP.  From 2012 onwards their pensions will be thus:-

A Final Salary Scheme

Three levels of Contributions and accrual rates; these are

7.75% with an accrual rate of 1/60th

9.75% with an accrual rate of 1/50th

13.75% with an accrual rate of 1/40th

To be fair these are the figures for a basic MP, Cabinet Ministers etc have slightly raised contribution rates.  Full details of the MPs’ Pensions 2012 Onwards can be found here.

So, in conclusion, it seems that the best pension scheme to be signed up to is the recently reformed MPs Pension Scheme, with its Final Salary benefits.  A Constable retiring now who had ‘joined’ the top tier of the MPs’ Pension Scheme would realise a pension of just over £27k p.a. after 30 years service before commutation if my little old calculator is working well.

Finally, I have one more comment to make on Police Pension Reform.  We know from documents we’ve already seen that Winsor’s brief was to come up with something that looked like the Hutton Recommendations.

Contained within Annexe A is Recommendation 4 which I reproduce in full:- Recommendation 4: The Government must honour in full the pension promises that have been accrued by scheme members: their accrued rights. In doing so, the Commission recommends maintaining the final salary link for past service for current members.

What does this mean?  Has it been carried over into the reform of Police Pensions?  I need someone with a better knowledge of pensions and gobbledygook to help me out with that one.  As I am retired I have no direct access to the Federation and rely totally on published documents, so if I have missed something along the way please forgive me.  So do we still think that the new Police Pensions Scheme is amongst the best available?

A Certain Person’s Pension

I can’t possibly write the full answer to the question in 140 characters and Tweet Longer isn’t necessarily the best solution, so I have decided upon a short, to-the-point extra-ordinary blog.  Here is the information regarding the new Chief Inspector HMIC.  As you will see it is written in a way that suggests it was formulated before the selection process was complete.  And I quote:-

Contract — The appointment is for a fixed—term of three years, with the option of extending it for a further two years subject to satisfactory performance and Ministerial approval.

Remuneration — The salary scale for the appointment is £195,000 to £199,995, and will be determined upon appointment. No allowances will be paid.

Working hours — The normal hours of work are based on a five day week of 36 hours, excluding meal breaks.

Location — The post is in London although there is a requirement to travel across the UK.

Annual leave — The annual leave allowance will be 30 days per year. In addition, the postholder will receive 8 days bank and public holidays and two and a half privilege days, which are to be taken at specific times of the year.

Pension — The appointment will be pensionable from the outset.

  • Serving police officers will be able to continue contributing to the Police Pension Scheme (PPS) for the duration of this appointment as the post falls within the scope of the scheme (Police Pensions Act 1976). This abates the pension of retiring/retired police officers.
  • Those who are not serving police officers will be able to join the Civil Service pension scheme. This offers a choice of a career average or stakeholder pension, giving you the flexibility to choose the pension that suits you best. The alternatives are:

—  Nuvos — A high quality, index—linked defined benefit pension scheme, payable at 65, that currently has a 3.5% member contribution rate. We also make contributions and meet the bulk cost of the scheme.

—  Partnership Pension Account — This pension account provides a way of saving for retirement. The department will make contributions to a stakeholder pension, which is a form of personal pension. The departmental contribution will vary according to your age at the beginning of the tax year. You may decide how much you want to contribute, but you do not have to contribute anything. If you do contribute, the department will match your contributions up to a maximum of 3% of pensionable earnings.

Please note:

  • If you previously worked for an employer who participated in the Civil Service Pension Scheme, different conditions may apply, as may your benefits if you left the Civil Service with an early retirement, severance, or redundancy package. Additional details can be found on the website: www.civilservice—pensions.gov.uk. Further information about these schemes will also be made available on appointment.
  • Abatement of pension may apply if you are in receipt of a public service pension. In addition, civil servants who have been granted early retirement (under the terms of the Compulsory Early Retirement, Compulsory Early Severance, Flexible Early Retirement or Flexible Early Severance schemes) may be required to repay all or part of their lump sum compensation payments if their re—employment commences during the period represented by the compensation payment.

Monsieur Angry’s ‘Oliday

With apologies to Jacques Tati

Well, I don’t know, I take a fortnight’s holiday and the whole world’s gone mad.  First though you have to look at my holiday photos, well not really.  Basically Mrs Angry and I set off on a roadtrip to visit old friends in the area of France where we used to live.  We drove down to the Tarn taking a couple of days to get there, spent 4 lovely days with old friends and neighbours (French) and then had a couple of nights on the Med.  Returning towards home we stopped off at the homes of various ex-pat friends, including a retired Met DI, eventually arriving home some 2,500 miles later.  We tried to drink the wine lake and I did my best to consume every steak in the country but we failed. Tired but happy were we, and then I catch up on this lot:-

Pension Reform

I joined the Met in 1972 on a 30 year contract, it was simple.  Work for 30 years, pay 11% and get a 40/60ths pension at the end of it.  It was an expensive pension, but everyone knew where they were and if one wanted to there was opportunity to start another job at the end of it.  They even brought in the scheme whereby you could retire on Friday and start again on a new contract on Monday, although I never fully understood how that really benefitted anyone other than The Job cos I could get paid 40/60ths just for staying at home, but life was straightforward and everyone knew what their rewards would be and when they could get them.  Indeed, it was entirely possible to retire at 50 years of age and immediately draw a full pension at 40/60ths.  Over the years it got tinkered with, but I can’t recall any significant changes during my service, and those that were introduced were introduced for new entrants, existing members keeping their original entitlements, a system which I see as right and proper.  In 2006 it was significantly (in my view) changed to include such perks as an accrual rate of 1/70ths, 35 years of service before you could draw your pension and then a full pension was equal to only half your final salary.  Already I can see that HMG has been fully committed to protecting the value of your pensions. In 2010 the previous Government did us the honour of switching from RPI to CPI when it comes to inflation-proofing our pensions, a move that I believe, begins to erode their value. Then along comes Mrs May and her Minister for Policing, Nick Herbert, ably assisted by Tom Winsor,  and an announcement that Police Pensions are going to be reformed, but don’t worry, I heard her say, we will negotiate with the Federation.  On only 6th July 2012, Theresa May said this “In common with the reforms that are being developed across public service pension schemes, the Government is committed to ensuring that police pensions are affordable and sustainable for the future. Let me reinforce that police officers should, and will continue to, have access to pension arrangements that are among the very best available.”  On 27th March 2012 Theresa May outlined the Governments proposals for Police Pension Reform

  • An accrual rate of 1/57ths (apparently 5% better than most other public sector schemes)
  • Officers contributions to increase to 13.7%
  • Normal retirement age of 60

Then her and her staff negotiated the very best pension available with the Federation, or maybe she just told them what they were going to get, I’m not sure, but what we ended up with was

  • A pension scheme based on Career Average Earnings and not Final Salary
  • An accrual rate of 1/55.3ths
  • Members contributions of 13.7%
  • A Normal Retirement Age of 60, but the possibility of retiring at a minimum age of 55 with an actuarily reduced pension

So if I have got this correctly ( and I may not have, happy to accept that) you will now work longer i.e. anything up to 40 years, pay more (13.7% of your pay) and get less (pension based on career average not final salary.  Best case scenario to me is work 40 years to get 40/55.3ths of your average salary.  I can immediately see how this is one of the best pensions available, best for the Government, definitely not the member.

In a lot of ways the final Pension Scheme mirrors Lord Hutton’s recommendations, and some of you may think that that was the brief, to come up with a scheme that Lord Hutton had already thought of.  However, there is one recommendation in Lord Hutton’s report that I have been unable to find so far in the new 2012 Police Pension Scheme – Honouring, in full, the pension promises that have been earned by scheme members (their “accrued rights”) and maintaining the final salary link for past service for current members;  maybe it’s in there and I just haven’t seen it yet.

Nick Herbert

So, Nick Herbert has quit the Government.  A sad loss I’m sure you’ll agree.  I have read reports that he was unhappy at not being offered a new job in the Cabinet Reshuffle.  Presumably he thought he was going to be the new Home Secretary and when Mrs May managed to hang on to that role could see no better prospects for his career. He is apparently now keen to “focus on new ideas & protecting countryside” outside of government.  I wish him well, who knows maybe a return to the Policy Exchange might be on the cards as well.

Olympic Medal Ceremony

Apparently whilst I was away some government ministers were booed and heckled at the medal ceremonies of the Paralympics.  Firstly I would say that the performances of all of the athletes competing at the Paralympics is immense and the winners fully deserved their moment on the rostrum, but if government ministers think that the great British public should not show their disapproval of the government’s performance then they need a reality check.  The current Government is incredibly unpopular, second only (probably) the Maggie Thatcher and her government of the day.  They need to recognise that fact and work out how they’re going to deal with it.  So far, it looks like they’re going to ignore it.  Do so at your peril, although akin with previous Tory regimes they will probably be only too happy to lose comfortably at the next General Election.

Judge Peter Bowers

Finally, I could not hang up my quill without commenting on M’Lud Peter Bowers.  How on earth is burgling someone’s home ‘brave’?  Crime and Disorder are big enough problems in society today without sending out messages such as “it’s very brave of you to burgle those houses, so in recognition of that fact I will not be sending to prison”   even the misguided poor soul himself does not think he was being brave ‘I don’t think burglary is a courageous thing to do. I felt awful about it, to be honest, but I can barely remember even doing it. I was on 60 to 70 valium tablets a day at the time.’  60-70 valium per day?  Well, that’s alright then.

Bugger, that was the last straw and I’m now so angry that I have snapped my quill, so until I can afford to buy a new one I will bid you farewell.  If I have made any errors in the Police Pensions paragraph please be gentle with me, I’m far from being an expert on pensions but Mrs Angry has taught me over the years, and on numerous shopping opportunities, how to recognise what is more expensive than the alternative, so blame her if I’ve got it wrong.