Link to this page: http://www.socialistparty.org.uk/issue/419/4769
Is there a pensions crisis?
THE GOVERNMENT have launched an all-out attack on pensions. Whilst they sit on one of the best public-sector pensions schemes available, MPs and government ministers lecture us all about living too long and not saving enough. KEN SMITH exposes the truth behind the pensions 'crisis' and puts forward a socialist programme for pensions.
Q - Does the Socialist Party support the raising of the retirement age?
We are absolutely opposed to raising the state retirement age. This is robbery from millions of workers who have paid National Insurance.
A worker aged 20 now will lose nearly £14,000 of pension entitlements (at current values) by the time they retire in 2050. This is in addition to the thousands they may have lost with the bosses continuing to attack occupational pensions.
The Turner Report shows once again that retirement and pensions entitlement is a class question. Many manual workers and low-paid workers will never reach the state retirement age - whether it is 65 or extended to 68.
And even if you reach retirement age, a report from the Faculty and Institute of Actuaries in January 2005 showed that the size of someone's pension determines their life expectancy. According to them, people on pensions of less than £4,500 a year are likely to die earlier than those with a pension of more than £13,000 a year.
For many workers, the need to resist the attacks on pensions will clearly be a matter of life and death.
We are in favour of flexibility over retirement ages. Starting at 55, workers should be able to retire on a full pension. Those who want to continue work should be able to do so or do some part-time work with part pension to bridge the gap between work and retirement for those who want it.
The Turner Report favours big business - by reducing the burden on them to provide occupational pensions. It also appears to offer a simpler way of providing a safety net to stop pensioners falling into absolute poverty without means testing. However, it does nothing to effectively remedy pensioner poverty or close the gap in wealth in retirement between the haves and the have nots.
In fact, it is possible that if the Turner Report were implemented it would mean the end of occupational pensions - at least in the private sector. Therefore there could be a whole generation of private-sector workers who will face a retirement just above the poverty level, as opposed to a retirement income that guarantees a certain security.
Q - Is there a pensions crisis?
The biggest pensions crisis that already exists is that millions of older people have retired into extreme poverty, living on means-tested benefits.
There is also a crisis of the bosses' own making in the funding of occupational pensions. They had an £80 billion surplus in 2000 and a £77 billion deficit in 2002.
Many pension funds are in danger of collapsing, unless the bosses were to forgo their super-profits and dividends and put billions of pounds back into the schemes.
In terms of a generalised demographic crisis - the idea that we are all living too long - there is not a pensions crisis. Only a few decades ago we were all told we would be able to retire in the future at the age of 50 because of new technology and rising prosperity.
But the neo-liberal offensive - the drive for super-exploitation to produce super-profits for capitalism - has seen bosses and governments try to drive down the wages and social wage of workers.
This has gone further in some countries, although all the advanced capitalist countries are trying to cut government expenditure that serves the interests of working-class people.
Q - Can the state afford decent pensions?
According to Treasury figures, the UK spends only 5.5 % of gross domestic product (GDP) on pensions when the European average is around 10%.
Currently, the figure of 5.5% 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.
But, included in this portion of GDP are huge amounts in subsidies the government gives to private pensions. Tax relief for private pensions and those who have opted out of the second state pension is 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.
Q - What's the Socialist Party's alternative on pensions?
- No increase in the state pension age
- Defend the right to early retirement
- For a national trade union demonstration uniting all workers and pensioners to build a movement that brings back final-salary schemes, the right to retire at 60 and introduces a decent, living pension equivalent to the European Union decency threshold of £320 a week for all pensioners.
- A socialist pensions policy that lets workers start drawing a decent state pension at 55. Those who want to continue to work could do so.
- Part-time work with part pension to bridge the gap between work and retirement for those who want it.
- Pensioners should receive an immediate 50% increase in the state pension, and this should be extended to all state benefits.
- The link between pensions and earnings should be restored.
- In addition, pensioners, having contributed to society all their lives, should be entitled to free housing, heating, telephone and travel within Britain.
These measures would cost around £15 billion a year.
But £100 billion has been lost to the Treasury by accountancy firms using tax evasion methods.
There is also a £25 billion surplus in the national insurance fund - because state pensions have dropped so much relative to earnings in the last 20 years.
If the tax relief for the richest taxpayers was reduced or abolished, if corporation tax was increased and if state expenditure on defence - over £27 billion a year - and debt interest repayment - over £24 billion a year - were all used, then the government would have more than enough to cover additional future pension liabilities and considerably raise the state pension, at the very least.
Q - What should the unions do now?
Push the TUC or their own trade unions to act on the decision of September's TUC congress and call a national demo on pensions.
This would unite private and public-sector workers with existing pensioners in the initial fight to retain the retirement age at 65 and for decent pensions for all.
Tory shadow minister quotes Engels!
THE SO-CALLED pensions crisis has certainly given anyone still hoping that Gordon Brown will re-claim the Labour Party for socialism cause for second thoughts.
On the face of it Brown is in fact to the right of Blair on this issue. Blair has broadly supported Turner's proposal for an increase in the state pension to be paid across the board to all pensioners while Brown is keen on more means testing with increased payments only going to the very poorest pensioners. Both Blair and Brown agree that the retirement age must increase (for low-paid workers relying on the state pension, not them) in order to minimise public spending.
But Turner's proposal for an increase in the basic pension is not motivated by a left-leaning concern for poor pensioners. In fact the idea of a more generous state pension has already been trailed by David Willetts, Conservative shadow Trade and Industry Secretary.
Borrowing from the language of EngelsQ, Willetts has called for the 'socialisation' of pension provision, surely some mistake!
It is a safe bet that Willetts, Blair and Turner have not embraced Engels' belief in scientific socialism but they support a greater role for the state in pension provision to relieve companies of the costs involved in providing occupational pensions and "avoid years of corporate underperformance" (Willetts). Or to put it another way to protect profits. They are also concerned that by 2050 over 70% of pensioners would qualify for the additional means-tested pension and this would discourage workers from saving out of their limited wages.
Adair Turner himself was formally the director general of the Confederation of British Industry (CBI). Any difference that does emerge between Turner, Blair and Brown will have nothing to do with improving the outlook for British workers in retirement and everything to do with balancing corporate profits against lower government spending and lower taxes on business.
Turner presents pages of impressive-looking tables and charts. But they all start from the premise that because there is a greater proportion of pensioners than before we cannot afford to retire at such an early age. But nowhere is this case even made, let alone proven.
According to the Office for National Statistics (www.statistics.gov.uk), Britain's total economic output (GDP) divided by the number of people in Britain (GDP per capita) has increased by 300% since 1948. If we now have three times as much output per head (these figures allow for inflation) why on earth can we not increase, never mind cut, pension entitlement?
Is Gordon Brown telling us that his economic miracle is all a big lie and in reality we can no longer match the productivity growth of the past 60 years? Either the political and industrial leaders of Britain plc expect a steep economic recession or they want to cut pensions to increase profits still more. Either way, their starting point is that their profit-led system is incapable of even maintaining the level of welfare British workers enjoyed in the post-war era.
Questions also arise when Turner's projections for life expectancy are studied. No account is taken of the huge differences in life expectancy between manual workers who work until 65 and executives who retire in their fifties. According to the Office of National Statistics the life expectancy for a male unskilled worker born six years ago is only 67. Under Turner's proposal the average male manual worker would never see their pension book.
The Turner report is full of unproven assumptions and proposes to deny many of Britain's least well off workers a pension at all. Turner is telling every unskilled worker in Britain to work until they die. The report is an affront to human dignity, yet there is a conspiracy of silence amongst politicians and media barons, who are all committed to the defence of corporate profit over all other claims on the nation's wealth.
And there is the nub of the pensions crisis. It is not a crisis because Britain cannot afford to fund pensions but a crisis because Britain's business leaders are demanding a bigger and bigger slice of the cake, at workers' expense.
- Frederick Engels, Socialism Utopian and Scientific, 1884, available from Socialist Books.
Turner makes rich richer and poor poorer
AN OECD report has exposed the fact that for many years, Turner's proposals will benefit better-off pensioners more than the poorest.
Everyone starting work in 2010 will benefit but in the short term the better off will benefit more.
This is because high earners will benefit from rights to the state earnings-related pension and the second pension - as well as benefiting from the restoration of the link between the basic state pension and earnings.
A pensions specialist at the OECD commented: "There are only two ways of reducing means testing: make the rich richer or the poor poorer."
Turner is recommending making the rich richer, to avoid them having to claim means-tested benefits, while keeping the poorest poor, for a very long time.
British pensioners in poverty
UK workers get 37% of their working-life earnings (made up from the state pension and occupational pensions on retirement on average
In the Netherlands workers get 70%; in Sweden 76% and in France workers get 71% of their working-life earnings.
- The vast majority of pensioners in Britain live below the official poverty line. Four out of ten live on less than £10,000 a year.
- More than 1.6 million pensioners have returned to work to supplement their meagre pensions. Millions of pensioners, according to a report in the Daily Mail in February 2005, cut back on the essentials of heating and electricity.
- A report in November 2005 revealed that over two million women are not entitled to a state pension or have minimum entitlements.
- At the same time many go without benefits they are entitled to. Last year (2004) £2.93 billion in payments were not claimed because pensioners don't wish to claim means-tested benefits or don't know what they are entitled to.
- As many as 12 million workers are not saving enough for a decent retirement because of low wages and poverty - that is the real root cause of any pensions crisis.
- A report by B&CE Benefit schemes in October 2005 concluded that 37% of full-time workers - as many as 6.5 million people - are not contributing to a pension. They face cuts of up to 30% in their retirement income compared to current pensioners.
Gas workers vote to strike
BRITISH GAS engineers, members of GMB, have voted to strike to protect their pensions. Nearly 6,000 workers voted by 4 to 1 for five 24-hour strikes, starting on 12 December.
Two years ago, British Gas/Centrica allowed their workforce to chose whether to close their existing schemes or pay increased contributions. The workers overwhelmingly voted to pay more to keep the scheme open and the company promised to abide by the result. They are now reneging on the agreement.
The engineers are responsible for domestic work, including boiler servicing and breakdowns.
TGWU members are also likely to back this action.
- Members of Amicus, TGWU and GMB are demanding assurances that their pensions will be protected when two parts of nuclear group BNFL are sold off. The unions have threatened to ballot for industrial action.
State pensions scandal
STATE PENSIONS in Britain have been falling behind other countries for decades. The percentage that state pensions are of average earnings varies from 40% in Denmark to 100% of the national minimum wage in the Netherlands.
Britain is the lowest by far.
The state pension figures for the major EU countries as a percentage of average earnings are:
Netherlands 100% of national minimum wage
Italy 83% of average of total career earnings
Luxemburg 80% of average earnings
"This is a wholly unacceptable attack on our deferred wages. If Brown and the rest of the New Labour crew do as rumoured and renege on the deal on public sector pensions they should be confronted with the biggest display of trade union action this side of World War Two."
Andrew Price, NATFHE NEC
"In Lincoln we've been campaigning on pensions through my UNISON branch.
I was told today by our branch chair that he had handed in his resignation to the Labour Party as this was "the final straw".
He said he was fed up with the housing issue, war in Iraq etc but the pensions issue had finally got to him.
He said he had firmly believed that you could only have an influence from the inside but he'd had enough."
"The bosses are now using the Turner report as an excuse to attack the recent deal on pensions made between the public sector and the government.
What they are really trying to do is create division between workers, all of whom deserve a decent pension, whether they work in the public or private sector.
It is now incumbent on the TUC and the trade union movement to unite workers together, defend what we've got and ensure no detriment to any worker's pension."
Marion Lloyd, PCS NEC
In The Socialist 8 December 2005: