Top civil servant grabs £2.3m pension

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Top 58-year-old civil servant Sir Gus O'Donnell is retiring early. But if you had amassed more than £2.3m in your taxpayer-funded pension pot, you might be tempted to cut and run ahead of schedule. Especially as the government is shortly hiking the retirement age for both men and women while urging public sector workers to pay more into their own pension. Substantially so, in some cases.


Concerns

O'Donnell, who has worked under three prime ministers, will also be picking up a cash lump sum of around £320,000; his income from his taxpayer-funded pension will be around £110,000 a year (most public sector workers can expect between £5,000-£8000 a year, the TUC estimates).

Announcing his retirement, O'Donnell wrote an email to civil servant colleagues up and down the country. "I have been a civil servant for 32 years and remain convinced of the importance of our traditional values of honesty, objectivity, impartiality and integrity in underpinning all the work that we do."

However, there have been legitimate concerns about O'Donnell's own role. Not only has he been head of the Cabinet Office, he's also the boss of the entire civil service, as well as finding time to be the PM's most senior policy analyst.

Three salaries

Which is why his job will be split three ways after quitting, meaning there will be a separate head of the Civil Service, separate head of the Cabinet Office, plus Cabinet Secretary.

Which will cost the taxpayer more overall. Three salaries instead of one. With one role - Permanent Secretary for the Cabinet Office - in charge of, er, cutting costs and (that wonky phrase) "joined-up" government.

O'Donnell is getting out in good time and could probably top up his income further in the private sector. Meanwhile up to 15m private UK workers have no occupational pension at all.

Affordable

One little-known fact lost in the current pensions squabble is that the actual cost of providing tax relief on pension contributions is much greater than the net cost of public sector pensions. Most public pensions are affordable.

In 2007/8 tax relief - skewed mostly to the better off - cost £37.6 billion. An enormous sum, and almost ten times the net cost of unfunded public sector pensions. Not that Sir Gus O'Donnell will be worrying much about such uncomfortable discrepancies.

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