More for Me, Less for You
Jumping Out of an Underfunded Pension Scheme
Interesting arithmetic in Jacob Williams’ run-down of illegal (as judged by the Wales Audit Office) in-lieu-of-pension payments for the most highly paid officers in Pembrokeshire and Carmarthenshire county councils. In both authorities, the chief executives opted out of the local government pension scheme and received ‘pay supplements’ to compensate them for losing the benefit of employer’s pension contributions.
In Pembrokeshire — but not stated to be so in Carmarthenshire — the ‘pay supplement’ for the chief executive, Mr Bryn Parry-Jones, amounted to 14.7% on top of his salary, made up of 12% to replace the employer’s contributions that would have been paid into the pension scheme for his own future benefit, and 2.7% that was supposed to go into the pension scheme as a whole, to help meet the costs of scheme management and to restrict future deficits.
Thus a payment of 2.7% of the chief executive’s salary went directly to him, rather than into the pension fund for the benefit of all members. The Wales Audit Office report says (paragraph 55) that “there would be some additional cost to the Council, as a future actuarial assessment would be based on fund assets that had not received the additional contributions”.
One of the main excuses for the ‘pay supplement scheme’ was that it would not cost the council a penny extra, but as applied in Pembrokeshire it diverted much-needed money away from the fund, the Dyfed Superannuation Scheme. This scheme, which is administered by Carmarthenshire County Council, had 38,341 members as at March 31st 2012 — 17,569 making contributions, 11,365 with deferred pensions, and just 9,407 receiving pensions. The pension fund was not looking too healthy when the chief executives of Pembrokeshire and Carmarthenshire, and another unnamed officer in Pembrokeshire, were walking away. At March 31st 2013 the present values of its liabilities were £492.63 million, but the fair value of its assets was just £369.15 million, according to figures published in Pembrokeshire County Council’s financial statements for 2012-13. Many thousands of past, present and future local government employees will rely on this fund for a reasonable standard of living in retirement.
The fund will need to receive substantial excesses of inflows and investment gains over pension payments out during the next several years. Given the heavy pressure on local authorities to cut spending and say goodbye to staff, and the end of rapid economic growth, from whom are those financial inflows to come? The problem is not unique to Dyfed — local government pension funds all over the UK face similar pressures.
Pat Dodd Racher