The great pensions robbery

THE PENSION rights of the majority of the British workforce are under attack.

Unless you're a judge, an MP or a fat cat chief executive of a FTSE 100 company then the chances are that you've either had your pension rights cut or are facing an attack on those entitlements.

This feature is based on the Socialist Party's new pensions pamphlet.

For years, private-sector companies have been ripping off their workforce and eroding their pension entitlements. By ending the final salary pension schemes and taking contributions holidays, the bosses have saved themselves over £20 billion since 1987 in reduced contributions and, at the same time, increased their company profits by over £4 billion, according to the TUC.

The bosses have done this to boost their profits and ensure their declining capitalist system increases its profitability overall.

Now the government plans to get in on the act. By increasing the retirement age, ending final salary schemes in some sectors and increasing employee contributions the government hopes it can cut the cost of pensions in the public sector by 15%-20%. This is estimated to amount to at least £100 billion.

Millions of public-sector workers are facing daylight robbery from their pensions by this government. Local government workers will be affected from as early as April 2005.

For all workers, pensions are in effect deferred or unclaimed wages. Trade unions have generally always negotiated on pensions entitlement as part of the overall pay package, so any attempt to change them effectively amount to a pay cut.

Chancellor Gordon Brown claims that workers have to take a pay cut because there is not enough money in the Treasury to pay for the private sector's pension crisis or to pay the government's own commitments as an employer.

Brown conveniently forgets the tens of billions that have been handed out in cuts in corporation tax and other handouts to big business in recent years. And, he conveniently ignores the 'blank cheque' he says he is prepared to write to cover the invasion and occupation of Iraq - which is now projected to cost over £7 billion.

We are told to take a pay cut while the government allows the rich to get even wealthier. Blair and Brown still refuse to raise the level of income tax on the super-rich who are laughing all the way to the bank.

Gordon Brown is facing a public-spending black hole because of this obscene generosity to the wealthy and big business. In order to balance his books he is desperate to cut as much public spending as possible and wants to follow the road trodden by private employers in effectively cutting workers' pay by slashing their pensions.

Fight the cuts to council workers' pensions

The government would have you believe that public-sector workers live a retirement of luxury. They should remember that the average pension for a council worker is just £3,800 a year!

Glenn Kelly, secretary of UNISON's Bromley local government branch

The government claims that "the current scheme has become unsustainable because we are living longer and drawing our pension longer".

Clearly, we should now apologise for not dying early enough! Whilst it is true that life expectancy has increased overall since the days of the workhouse and children being sent up chimneys, it is not correct to say the life chances are the same for all, regardless of wages and jobs.

Life expectancy for a male manual worker has only gone up by 1.5 years in the last 25 years. For women cleaners it has not increased at all. There is also a difference according to where you live. A man living in Manchester is expected to live till he is 69.7 whilst for a man in Dorset it is 79.6 years.

The government says: "The current schemes are no longer defensible because of the closure and changes to pension schemes in the private sector".

It is true that workers in the private sector have been victims of some horrendous cuts in their pension schemes, with two million losing their right to final salary schemes in the last ten years. However, since when did two wrongs make a right?

The government's argument is sheer hypocrisy anyway. Why is it that an MP has only to 'work' for just over 20 years to get maximum pension while a council worker has to work 40 years?

The real reason for these attacks is that the government wants to make massive cuts in public-sector spending off the back of those who provide the services that the public rely on.

The government gave the game away in their Green Paper, when they said that currently the pension is funded 72% by the employer and 28% by employees. They want to shift this to a 60% (employer) to 40% (employee) ratio. This Green Paper details even more attacks on the pension scheme to be introduced in 2008.

So what will the changes mean?

Backdoor increase in the retirement age

At the moment, once you reach 60 you can retire without your employers' permission and take your pension without any reduction in your entitlements.

However, as of April 2005, the new rules will be - whilst you can still choose to retire at 60, you will lose up to one-third of your pension!

This proposal alone will force many workers to carry on working till they are 65 and is a back-door way of increasing the retirement age.

Right to retire early under attack

Currently, once you reach 50, you can ask for permission to retire early. And, if you qualify under the 85-year rule. (That is if your age and years worked combine to 85 or more then you can retire with the employers' permission before the age of 60, without reduction. Like someone aged 50 or over having worked for 35 years). Also, if you are made redundant and are 50 years or over, you can also take your pension without penalty and can even get added years.

These rights will be abolished and you will only be able to take early retirement once you are 55 years or older, even if you are made redundant.

Pay more to get less

At present, most staff pay 6% of their salary into the pension scheme, which for many workers is already a struggle.

Under the new proposals, anyone earning £7,000 a year or above will have to pay 7% of their salary in pension contributions. Incredibly the government have tried to argue that this is to make the scheme fairer for the low paid!

This is a 1% pay cut and comes on top of all the miserly pay deals we have had for decades.

For those earning above £38,000, contribution levels will go up to 9% and for senior managers/directors' (£80,000 and above) contributions will go up to 10%.

What will count as pensionable pay?

As with all final salary schemes, the more of your earnings that are included, the better your pension will be. The government are planning to disregard some of local government workers' earnings, which are currently included in calculating the pension.

At the moment, pensionable pay includes things like shift payments, weekend working payments, sleep-ins and contractual overtime etc. For many, particularly low-paid staff (residential workers, home helps, school workers, caretakers, parks workers, library workers etc) these payments can make up as much as one-third of a worker's wage.

The government is proposing that only the basic salary would now be used to calculate your pension. This measure alone could see a cut in pension of up to a third for many staff. No doubt this is supposed to help the low paid as well!

Don't dare to get sick

The employers have already been putting the squeeze on staff. If you are unfortunate enough to be so unwell as not to be able to work, it has become extremely difficult to get ill-health retirement, without being carried out in a wooden box.

At present, to qualify for ill-health retirement you must be so sick as not to be able to do "your job or work of a similar kind" until you are 65. This has to be agreed by two doctors employed by the council.

This already has meant some brutal decisions for council workers, particularly in stress-type cases. One worker who had given 30 years' service was sacked because she was sick and would be until she was over 60. But because no doctor would guarantee that she would be ill until she was 65 she couldn't have access to her pension and she was left with nothing. This has led to workers literally having to sell their homes to survive.

The government now want to make the situation worse. To qualify for ill-health retirement, you would now have to be unfit not only for your job but for ANY job no matter what that job is.

If you are permanently unfit for your job but could do any other job you could get access to your pension but it would be cut by up to one-third.

The option to 'buy back' added years is to go

Staff can currently pay additional contributions to cover some gap years in order to get continuous pensionable service.

This provision is critical for many female staff who have needed to take time away from work because of care responsibilities or for staff who have come into the service later on in life.

The government is now proposing to end the right to do this. Instead all workers can do is buy a separate money purchase scheme for those gap years. This won't count towards a final salary scheme. Instead, they would just have to hope that this pot of money would make enough on the stock market to cover the gap.

Some improvements

There are some marginal improvements. But these pale into insignificance when compared to the level of attacks and they are improvements that council workers will have to pay for.

Non-married partners including same sex partners will have access to a partner's pension. The death in service benefit is to increase. The spouse pension will not cease on remarriage.

These changes are long overdue and some of them are being forced on the government for fear of challenge in the European courts.

What will happen next?

The 2005 changes are due to be enacted by April and the consultation on the Green Paper ends in March 2005. Therefore, it is vital that as much pressure is exerted on the politicians as possible - after all they are likely to face an election in May 2005.

A united campaign and strike action by all public-sector unions before the general election would in the words of one Bromley head teacher: "Bring the government to its knees."

Government plans to keep on robbing

Britain's spending of 5% of GDP or £50 billion on pension benefits includes the basic state pension, SERPS, the second state pension, the minimum income guarantee and the winter fuel payment.

Other countries currently spend a much higher proportion of GDP on pensions. In the UK workers get 37% of their working-life earnings on retirement on average, including occupational pensions. But in the Netherlands workers get 70%; in Sweden 76% and in France workers get 71% of their working-life earnings, mostly from their state pensions.

The average spent on pensions among European Union countries is 10% and in OECD countries it is 7.5%.

The number of pensioners is set to rise from 11 million now to 17 million by 2050. At present rates of state pension benefit this will only see the cost rise from 5% to 5.7% of GDP - at current levels of GDP this would mean about an extra £700 million a year.

There is a £25 billion surplus in the national insurance fund - because state pensions have dropped so much relative to earnings in the last 20 years - so there should not be much problem in the government covering the bill for up to 30 years, if the state pension stayed at its current level.

But, the government gives huge amounts in subsidies to private pensions. Tax relief for private pensions and those who have opted out of the second state pension are now the equivalent of 2.5% of GDP. Half of that money goes to the richest 10% of taxpayers - with the top 2.5% grabbing over a quarter.

The government plans to keep the amount paid out through state expenditure at the same ratio of 5% of GDP while the number of people of state pension age or older is expected to increase by 40%.

Accordingly, the value of benefits paid per pension relative to the size of the economy means, according to the Pensions Policy Institute, that by 2040 each pensioner will receive on average a 40% smaller share of GDP than pensioners do today.

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