Saving up for retirement, try the new ‘Cock-up’ Pension Plan

The Government are keen to ensure everyone has a pension pot to draw down from once they reach retirement and the aim is to drive people to save towards those pensions. New pension legislation will require employers to opt people into pension schemes, though these plans are under some criticism as smaller employers will be required to spend an inordinate amount of time in pension scheme administration.

With the recent collapse in equity markets, many people have found their pension pot slashed by 30% leading many to question the stability of private pensions.

There is a much easier way to ensure a decent pension. It does require dedication and hard work, but like all good pension schemes, will enable you to retire earlier than you may have anticipated and you may even find yourself receiving a larger than expected pension, when it comes to draw down.

For some reason the Government and pension brokers are not pushing the new ‘Cock-up’ pension plan.

The scheme requires you do achieve a level of authority in an organisation. A level senior enough that when you wish to draw your pension, you are able to make such a significant cock-up, that your suggestion of retirement is a welcome relief to those around you.

According to the National Statistics Office

The average employee in private sector defined benefit occupational pension schemes contributed 4.9 per cent of salary to their pension in 2007, compared with 2.7 per cent for employees in defined contribution schemes.

In 2007, the average employer contribution rate for private sector defined benefit schemes was 15.6 per cent of salary, compared with 6.5 per cent for defined contribution schemes.

If instead of investing at the full rate of 15.6%, to achieve the ‘cock-up’ pension you are advised to invest part of this money in ongoing education, you will then be better be placed to achieve higher office in your organisation and the higher the post held, the better the payout.

How does the ‘cock-up’ pension work?

Fred Goodwin

Fred Goodwin

Let us take as an example. Sir Fred Goodwin, the former head of RBS.

Had he tried to purchase his pension on the open market at the age of 50, with index linking and widows benefit it would have required a pension pot of £30 000 000.

His salary including bonuses was £4.2 million a year.

Using the average yardsticks this would have amounted to an employee and employer contribution of about £900 000 in the year. To build up this pot would have taken just over 30 years to amass (excluding investment growth), assuming average earnings over that time of £4.2 million a year.

Lets try another example.

Bob Quick

Bob Quick

Bob Quick, former Assistant Commissioner, who recently retired after wandering around with security documents on full view. He has been pushing his luck for a little while, well actually since he achieved 30 years service in the Police Force.

He was forced to make 3 public apologies in three months. Initially accusing the Conservative party of a smear campaign and following up with his exposure of secret documents.

Mr. Quick joined the Police force in 1978 and was forced to retire 31 years later at the age of 49 with a guaranteed pension of £114,000 a year, or a £520,000 lump sum and £85,000 a year.

Rules on police pensions, to which officers contribute 11 per cent of salary, provide payouts of two-thirds of final salary for those who have served 30 years.

Apart from salary increases Mr. Quick had little more benefit to gain from his pension. At the age of 49, he is comfortably set up with his pension and at the age of 49, has plenty of time to pursue a new career.

Had either of these characters not achieved high profile offices, then the likely effect of their actions would have been instant dismissal and although pension entitlements would have still been earned.

In the case of Mr. Goodwin, there is little doubt his final pension would have been considerably lower and in the case of Mr. Quick being fired from the police service, is not a good reference to start out on a new career.

I really think the Government and pension brokers need to push the ‘Cock-up’ pension plan more robustly as the substantial benefits to be gained using this method of pension provision would have tremendous benefits in reducing the reliance many of our current pensioners and future pensioners have on state support.

Further emphasis on ongoing training, which sits well with the Government mantra of higher education for all, reduced state funding of pensioners and happier pensioners who can afford to retire in their late 40’s and early 50’s, must be a win-win.

Oh dear, just one problem with the plan. It is the taxpayer who has to support these ‘Cock-up’ pension plans. Never mind as a pensioner you will be laughing your way to the bank (what is left of them).

On behalf of tax-payers, back to the drawing board.

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