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Labour's pensions - a social time-bomb
EX-PRIME Minister Tony Blair recently shored up his personal retirement plans by £250,000 or more, while the government he used to lead was undermining the future prospects of a secure retirement for millions.
Blair picked up a quarter of a million for just 20 minutes work, speaking to businessmen in China. Many more speaking engagements, paying similar amounts into his pension pot, are lined up plus a reported £5 million publishing deal for his memoirs.
The Blairs say they have a big mortgage to pay, so need these exorbitant sums. Those of us with more modest bills to meet than them will have to put up with a more modest pension entitlement – a lot more modest.
Buried in the small print of the Queen's Speech was phase two of New Labour's plans to slash away at state and private pension entitlement. The raising of the state pension age to 68 has now gone through parliament. A further bill aims for a new system of personal account-style pensions from 2012.
This new bill is likely to massively reduce costs to those employers who currently provide final-salary pension schemes. And while the plan supposedly provides a minimum level of pension for all, the government will probably also provide less toward the state pension element of any pension entitlement and pay less in means-tested top-up benefits than it does now.
The bill, if passed, will require employees' automatic enrolment into a new national pension savings scheme. It would require employers to put in 3% of pay where an employee decides to stay in. Employees will then contribute a minimum of 5%, of which one per cent will be tax relief.
Private sector rip-offs
THE GOVERNMENT says that despite the scheme being state-initiated, the personal accounts delivery authority, which will run the scheme, will use private-sector methods and 'expertise'. Yet, 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. At the same time, says the TUC, they increased their company profits by over £4 billion. So how can we expect them to introduce 'fair' pensions for all?
And what a lucrative market these changes could be for the private sector – a potential seven million members and £150 billion worth of assets under management by 2050.
The government's plans aim to increase the retirement age, end final salary schemes in some sectors and increase employee contributions. They hope to cut the cost of pensions in the public sector by 15% to 20% – estimated to 'save' at least £100 billion.
Yet, despite its attractiveness for private sector bosses, and the fact that they both voted for raising the state pension age to 68, both Tory and Liberal opposition parties have raised worries that the new measures could increase widespread pensioner poverty.
They are concerned that the new measures could create an even bigger pensions time-bomb than currently exists – particularly among layers of lower middle class people. They could find that the money they have saved for their pensions greatly reduces the amounts they could receive from the state in top-up benefits.
SOCIALISTS OPPOSED the raising of the retirement age to 68. This measure was daylight 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 after 2050.
This is on top of the thousands they may have lost with the bosses continuing to attack occupational pensions. What is more many people, especially manual workers, will unfortunately not be lucky enough to reach the age of 68 to start drawing their state pension.
This new attempt to place more of the burden for paying for pensions onto workers must also be opposed.
Socialist measures to provide decent pensions would include ending the hundreds of billions handed out in tax cuts to big business and taxing these companies' mega-profits to provide:
The right to retire from the age of 55 with a decent, living pension equivalent to the European Union decency threshold of £320 a week for all pensioners with flexible rights for workers to continue working if they wish to do so.
Part-time work with part pension to bridge the gap between work and retirement for those who want it.
Pensioners, having contributed to society all their lives, should be entitled to rent free public sector housing, heating, telephone and travel within the UK.
In The Socialist 22 November 2007:
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