Last Christmas, the investment managers in charge of one of the country's biggest pension funds had a bit to celebrate.
With £10 billion to manage, they apparently invested wisely and got a return for the fund of 12.1 per cent.
As they'd been good boys and girls, Santa delivered them a good set of fees. They were paid £11.3 million. That's for one year's work.
This Christmas, though, the they did less well. Less well in terms of the investment returns for the fund - a paltry 3.1 per cent.
You'd have thought that the Champagne would have been taken off the ice and the turkey downgraded to Spam this Christmas.
Not a bit of it.
Because this year they got a good set of fees too. In fact, they got pretty much the same as last year, £11.2 million. Whether they were naughty or nice, Santa delivered.
Two years ago they pulled in an astonishing £15.6 million for a mere 2.1 per cent return.
Nice work if you can get it. Some City of London fund? No.
One based here, in the West Midlands - The West Midlands Local Government Pension Fund, based in Wolverhampton. The 250th biggest pension fund in the world.
From the wages of the many in the West Midlands into the pockets of the few.
From over 260,000 employees and pensioners, in fact, into the pockets of the very few investment managers.
Whether they get a poor or a great return, rain or shine, they seem to rely on a continual trickle up of wealth to them.
Over the last six years, these investment managers have been paid £75 million just in fees. And £38 million in just the last three years.
You might think that it's a rather rarefied argument about pension funds for some local government workers you might know - it's not.
Those exorbitant investment managers' fees are, yes, coming from the funds of the local government workers and pensioners.
But if you live or work in Birmingham and the Black Country, or are a business there, they are also coming from you too.
And you and I are being asked to pay them even more over the next few years. Why?
Because this mega-wealthy, mega-pension fund of £10 billion has come with a legal begging bowl to every council in the West Midlands and has asked for more - from councils who have even less to give than ever before.
This supercharges the austerity cuts. Unchallenged (and with a sense of the unchallengeable) they legally require this payment now.
If you are a Brummie, then, your council is now being asked over the next three years or so to hand over (out of the council's income) £85 million.
That's £85 million extra. Above and beyond the £100 million or so the council will pay each year into the fund anyway (quite rightly) in normal pension contributions.
The fund has also required from us further, extra employer contributions per person so this will also be likely to lead to an overall extra bill of £100 million payable by Birmingham City Council's citizens over the next three to four years.
Doesn't the fact that £75 million has been paid out to some investment managers over the last few years suddenly come into a rather stark perspective?
The citizens of Birmingham alone (never mind all the other councils in the West Midlands which have their own separate bills) have to find £100 million.
Had the investment managers not been paid £75 million over the last several years, the massive bill would not have needed to have been delivered.
I say the austerity cuts should have started at home, in the fund itself and in what it pays to rich but poorly performing investment managers.
So while the wealthy few quaff upon the magnificent proceeds from paltry advice and paltry returns, the councils have to cut further and deeper into their services to the poorest.
As I pointed out in my book The Secret Wealth Garden earlier this year, there is no need for these mega-wealthy pension funds effectively to force West Midlands councils to add massively to the cuts they are already having to impose due to the austerity drive. It's a blow upon a bruise.
Their overblown and unreal actuarial calculations and dreadful performance have led to utterly unnecessary demands for bailouts - in fact they come from an economic and financial fantasy land.
This fund should be a real asset to the region, investing much of its mega-wealth on behalf of their West Midlands members. It does very little of that.
Much of it goes abroad. Instead, it is actually becoming a drain on the wealth of the region. So how does the £11.5 million a year paid out to the fund's investment managers seem now?
From your pockets into the pockets of the already wealthy investment managing few.
The reality is that these fees are not related to any absolute performance standards. They are vaguely benchmarked against the performances of all of the other Local Government Pension Funds. As long as everyone else is doing badly, then effectively you get paid the same as the year before.
This year the West Yorkshire Local Government Pension Fund had a fund value of £10.4 billion. The West Midlands fund was at £10.1 billion.
So they are similar funds in terms of fund size and scheme members.
But canny West Yorkshire paid its investment managers only £2.2 million this year for an investment return of 4.8 per cent. West Midlands shelled out £11.2 million for a return of 3.1 per cent.
The average annual pension paid out from the UK Local Government Pension Funds is £4,800. For women it is just £2,800 per year. In whose interests do these funds actually end up being run?
From 2007-2013, West Yorkshire got an annual return of 1.9 per cent over the deposit savings rate.
West Midlands got only 0.6 per cent above. So we paid £75 million to investment managers to get an annual return of just 0.6 per cent above sticking it in a deposit account.
West Yorkshire paid just £13.2 million in the same period. So I'd say at least £60 million has been taken out unnecessarily. And now they ask for £84 million extra from Birmingham citizens and businesses?
So Birmingham should demand a rebate, not an increase. And there might be less cutting of services to be done as a result.
And if the rebate and reform can't be gained then Birmingham should move its pension fund out of West Midlands, manage the fund itself – or give it to West Yorkshire.
John Clancy is a Labour councillor for Quinton, Birmingham
