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.


Turner Report

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.

Jared Wood

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:

Belgium 60%

Denmark 40%

Germany 65%

France 50%

Greece 80%

Netherlands 100% of national minimum wage

Italy 83% of average of total career earnings

Luxemburg 80% of average earnings

Portugal 80%

Spain 50%

UK 16.73%


"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."
Marc Glasscoe
"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