We have a Members’ Briefing at Babergh to be apprised of ways forward with regard to the integration and the budget issues. We are invited to ask questions and my question on the budget was as follows (btw it is long preamble followed by a short question):
Ten years ago our predecessors faced with a ignificant deficit in the pension fund decided to commence paying down that deficit by £1miilion a year.
This decision was very high minded and made in happier times of higher interest rates, a pensions fund friendly tax regime and a central government that believed in otherwise benign financial policies.
Since April 2000 we have paid down £10 million and as at the 31st March this year the deficit stood at £12,557,000.
More interesting is the way the deficit has fluctuated.
Had this been a closed end situation we would have expected the deficit to reduce on an annual basis by £1million a year. But is hasn’t. Over the past five years the deficit has ranged from a high of £31,469,000 to a low £6,242,000. The biggest change being in 2010 when the asset appreciation was £11 million. So our annual contributions can be and are dwarfed by the proper and skilful employment of the pension fund assets.
So where am I going with all this? After ten years we should review our pensions deficit funding policy.
We should look at the optionality of that £1million a year and if we can stop it we should.
We should then immediately transfer £500,000 of that money to our revenue reserves so that if we need to pull this money back because the deficit goes substantially against us then we can use it – and in the meantime we keep it in the sock under our bed ready for a rainy day – of
which more are promised.
The remaining £500,000 we should use to plug our current operating deficit – which means preserving services and the jobs associated with our front line. Already we are seeing services and standards disappearing before our eyes – cash payments downstairs for example – the removal of abandoned cars for instance and so on. We have a distinct opportunity to review our options and focus upon the current needs of our residents.
So my question and I hope our question is this: As the officers and Councillors on the SFP have said that nothing should be regarded as too sacred to touch, can we look at the pensions deficit pay down plan and if we can put that money to better use?
…I think the simple answer is “Yes”.
Well, it was not as easy as I expected but I did get my “yes”.
One Councillor thought I was advocating cutting pensions for the lower paid employees. – so it let me go back to him after the meeting and everyone else who might not have been hearing me properly along the following lines:
“Your comments at today’s meeting indicate that I had not expressed myself properly or else that I was mumbling (both possibly true).
It has never been (and hopefully will never be) part of my proposals to reduce the pensions or other income of the lower paid employees. My family had the smell of the workhouse in its nostrils and whilst society has progressed over the years, the safety nets are not always in the right place”.
The only other written comment I received was that I must have big feet if I thought I could salt away £500,000 in my sock!