In nineteenth century rural Australia, it was easy for staff to scam a bank. Each branch would only have a couple of staff, and they would typically stay in post for a long time. Records were hand-written, and head office inspections were infrequent. All lending would be in the community, making fraud easy. A banker could give a loan to a farmer friend, who knows their crop will fail. When it fails, the farmer blames the gods, and the bank writes off the loan. The farmer and the clerk share the money. How would the bank know that this was a scam? All lending, after all, would be to friends in a really small place. And friends don’t rat on each other.
My friend Professor Andy Seltzer shows how banks got round this by creating gold-plated pensions. If a member of staff was found guilty of gross misconduct, the bank would cancel their pension - completely. They would be left penniless in retirement.
This is a serious deterrent against fraud. If a farmer friend suggests a scam along these lines it just won’t be worth the risk. The accumulated value of the pension was very large indeed.
Today your employer cannot cancel your pension, no matter how badly you behave. I think those nineteenth century banks were on to something. People who are guilty of gross misconduct should lose (most of) their occupational pensions.
Consider Daniel Greenwood, who was in the news this week (here, and here). As a Police Chief Superintendent, he helped his young lover get a job with the police, then broke lockdown rules to have sex with her, at her flat. He admitted gross misconduct and resigned. The misconduct panel stated that his behaviour would have led to his dismissal. There are other cases of police officers found guilty of gross misconduct, and the same is true from time to time in other professions.
A Police Chief Superintendent, with 21 years service, can retire at 55 on about £30,000 a year, index-linked, with a lump sum of £100,000 or thereabouts. That pension pot is worth more than £1m.
I don’t think anyone who is sacked for gross misconduct, who has brought disgrace to the Police - or another public service - should be able to keep a £1m pension pot.
Specifically, I think that they should lose the share of the pension that came from their employer. In the case of the police, that means losing about three quarters. Daniel Greenwood would retire on a pension of £7,500, rather than £30,000, and with a tax free lump sum of £25,000, rather than £100,000.
The prospect of losing three quarters of your pension will surely make some people think twice before behaving badly. And when this does not deter gross misconduct, I think it would be excellent for society to claim back hundreds of thousands of pounds from anyone in public service guilty of gross misconduct.