Posts Tagged ‘Public Sector’

David Davison

Get me DCI Gene Hunt

An e-mail flew in to my in box this week which transported me instantly back to the 1980’s and those heady days of big hair, unfeasibly large shoulder pads and shiny suited insurance salesmen with mobile phones and bloated salaries.

The e-mail contained details of a tender for North Lanarkshire Council requesting bidders for the provision of independent financial advice for their employees. No problem so far, an enlightened local authority looking after the needs of its staff in a caring, sharing type way.

The time machine only started working as I read on and the document suggested, and I quote, that “the provision of independent financial advice is to be at no cost or liability to North Lanarkshire Council and there should be no charge to individual employees in respect of the advice service, although it is expected that the organisation will receive commission on product sales where employees chose to take up the options offered.”

Charge up the Quattro and get me another bottle of Perrier.

Alarm bells, or was it police sirens, went off in my head. Without wishing to be too hard on the Council’s well meaning intentions this whole proposal raises some pretty fundamental issues.

Firstly, that 20 years on, there seems an implicit suggestion that financial advisers continue to be remunerated with commissions that dramatically exceed the cost of the advice given and that anyone who wants it should be able to obtain financial advice for free! This is quite clearly no longer the case and with full commission disclosure, the compulsory option to pay by fees, and the imminent implementation of the FSA’s Retail Distribution Review it’s impossible to buck the system.

Secondly, the tender also asks that the adviser “run seminars and financial clinics at the request of North Lanarkshire Council, [and] provide free promotional literature in the form of leaflets, posters etc. for distribution to employees”.

The implication that the actual advice delivered will be of such low value relative to the “product sales” that there will be sufficient cross subsidy to allow costs for an all employee communications and seminar programme at the request of the council, raises other issues – such as just how much remuneration does the poor individual taking up the options offered need to generate to cover all of this and how competitive is what is being offered with what would be available in the open market?

Fundamentally a commission payment is an agreement between the client receiving the advice and the adviser providing it, not some short cut to employee benefits on the cheap, or a cross subsidy for an employer’s communication obligations. Commission, where paid, is of a much lower order than historically has been the case and tends to be spread over a much greater term of the contract with commission clawback a very real possibility where any agreed product is not maintained. It also has to be remembered that much of the best financial advice involves taking actions that do not result in any product sale.

Can the Council really justify this approach as being in the best interests of their staff?

This whole issue highlights some thorny issues about the difficulties of accessing quality advice in the modern workplace, but as a starting point a structured Financial Awareness and Education programme for employees, funded by the employer, would be much more 2009 and less 1989.

With the great strides made to professionalise the financial advice market and improve the quality of advice this really is, unlike ‘Ashes to Ashes’, a very unwelcome return to the 1980’s.

Neil Copeland

The Government appears to have come in for a lot of criticism for “guaranteeing” the pensions of the bankers at Northern Rock and Bradford & Bingley, (The Indepedent – “Pension guarantees for bankers savaged”) but I can’t see that it had a lot of choice.

In case anyone missed the banking crisis, these particular banks were nationalised last year. That makes the Government, in effect, their sponsoring employer. Thanks to changes in the legislation, it has, quite rightly, become virtually impossible for a solvent employer to default on its final salary pension liabilities. So Read more »

David Davison

The CBI has produced research suggesting that private sector businesses are being put off bidding for public sector work by the additional 25% – 50% of salary cost of pension provision which leaves many unable to compete with public sector employers who typically pay around 15%. The focus of the research was unfunded pensions schemes and there was a call to provide solutions such as admitted body status available in local government schemes.
Read more »

David Davison

News reaches me that the Pensions Trust, who provide a multi-employer pension scheme covering 100’s of small charities and not for profit organisations has decided to close the scheme for all future benefit accrual from April 2010.

Now I’ve been banging on for a number of years about the headaches this scheme has been causing small charitable bodies (frequently without them even knowing about them!!). Read more »

David Davison

As John McEnroe used to say – you cannot be serious!!!

At a conference last week Minister for local government John Healey described DC pensions as “cheap shot pensions” for public service staff, his rationale being that they would cost the country more for low earners.

Is it just me or does this show a fundamental level of double standards equivalent to parliamentary expenses. Read more »

David Davison

In a recent article John Healey, Minister for Local Government suggested that the local government pension funding black hole was a myth and that these schemes would not cost tax payers more.

I wonder where he thinks the money will come from? Maybe quantitative easing has actually made him think that money can be made out of thin air.

Or maybe he thinks the expenditure can just be claimed for on expenses!!

David Davison

So close to the 250th anniversary of his birth it seems appropriate to recall that it was Rabbie Burns who wrote  “Fair fa’ your honest, sonsie face, Great chieftain o the puddin’ race!  Aboon them a’ ye tak your place, Painch, tripe, or thairm: Weel are ye wordy of a grace. As lang’s my arm.“

Not being immersed in the culture of my adoptive home to the extent that I should be, I’m afraid I haven’t a clue what it means but it does alert us to the fact that things are different in Scotland. This lack of cultural awareness on my part wouldn’t stop me downing a wee dram of whisky and sticking my dirk into a haggis with the best of them, though I’d probably double check the meaning of dirk with one of my Scottish colleagues first. Read more »

Brian Spence

I am not sure who Gordon “we’re listening” Brown, our beleaguered prime minister and former chancellor, turns to for guidance in matters economic, but he could do worse than have regard, not to Keynes or Galbraith, but to Charles Dickens. Whether you are responsible for a household, corporate or national budget, we can all understand and relate to the conclusions of Mr Micawber on the happiness engendered by a budget surplus, the misery caused by a budget deficit and the fine line between the two. Read more »

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