Pensions crisis
Boss’s 15-year Pension ‘Holiday’
FROM 1967 to 1983 I worked for the NFC road haulage company, now called
Exel plc. I get a pension of £151 per month from them. Recently, Exel sent me
an annual review of their pension plan.
Peter Redfarn
Blair’s government – and people in the trade union movement who should know
better – blame workers for the pension crisis, saying we’re living too long
and not saving enough. This very interesting report shows differently.
NFC was a nationalised company, privatised by the Tories in 1982 as one of
the earliest of Thatcher’s privatisations. At that time, no one in the Labour
Party would openly question the renationalisation of privatised companies; the
argument was about what compensation, if any, should be paid.
Initially shares were sold only to NFC employees, with a bank holding a
minority stake. Of course, these shareholders were weighted towards middle
management, who could better afford shares, but all were eligible. Some Tories
claimed this made it a workers’ cooperative, but it was nothing of the kind,
and was floated on the stock exchange after a few years.
The report contains a revealing pie chart. In 1982 the government invested
£48.6 million in the pension fund as a sweetener. From 1982 to 1988, the
company contributed £54.4 million and employees contributed £36.3 million.
At that time the company operated final salary schemes that were fully
linked to the retail price index. In April 1988 the company closed these
schemes to new members and introduced a retirement plan with different rules.
Schemes
There are two types of pension schemes: a final salary scheme offers a
guaranteed pension based on wages earned over a period; in a money purchase
scheme, benefits depend solely on the stock markets – if stock prices have
gone down the pension will be lower.
The new retirement plan was a mixture of the two. Up to age 40, it was a
money purchase scheme; after that it was a final salary scheme. In addition,
index-linking was limited to a maximum of 5% a year.
From 1989 to 2003, Exel employees contributed £176.4 million, but the
company contributed – you’ve guessed it – nothing!
In April 2003, Exel closed the retirement plan to new members. They
replaced it with a purely money purchase scheme, appropriately called Voyager
as workers will have as much difficulty getting a decent pension out of it as
Captain Janeway will have in returning home from the Delta Quadrant!
For this scheme, workers pay 3%, or 4% if they’re over forty, and the
company pays 4% or 6% respectively. Exel also decided to pay £10 million a
year into the old schemes from 1 January 2004. This is roughly what they paid
in 1982-88, with no allowance for inflation, and members’ contributions will
decline as workers retire.
The report says: "The Group were aware that historically some members had
expected the surplus to be used in a 40:60 ratio between members and the
Company. That surplus had indeed been used in this ratio in the early days of
the Plan, roughly reflecting the ratio of employee to employer contributions
in the NFC plan. However, it was not a fixed or a standard approach."
But as we have seen, the benefits were reduced in 1988, and the company
paid nothing for 15 years.
Profits
On the "Factors affecting the use of pension surplus" one of the report’s
five bullet points is: "What is the effect of benefit improvements on Exel’s
profitability?"
There you have it: it’s pensioners versus profits. We can’t rely on
capitalists to provide proper pensions for their workers. They will pay as
little as possible, and subject workers to the chaotic whims of the stock
markets.
Nor can we rely on governments, in the pockets of the same big business.
When the old age pension was introduced in 1908 it was worth 23% of average
wages. That percentage is far less today.
The old Marxist slogan, "from each according to his ability, to each
according to his needs" is as valid as ever. Instead of having workers in
their late sixties competing with young workers for low-paid jobs, which is
what Blair’s government wants, socialism will provide a decent standard of
living for everyone.
Rich country – poor pensions
DAVE RUNNALLS of the Coventry branch of the West Midlands Pensioners Convention has sent us a list comparing pensions across Europe as a percentage of average earnings.
The Netherlands pays 100% of average earnings, Italy and Luxembourg pay 83%, Greece and Portugal 80%, Germany 65%, Belgium 60%, France and Spain 50% while Denmark pays 40%.
As for Britain – officially the fourth richest country in the world – pensioners here get a mere 16.75% of average earnings.
