'Be Afraid, Be Very Afraid,' was the Guardian's headline. 'Britain is hurtling towards a pensions crisis,' said the Sunday Telegraph. That was the alarm raised recently in the media over pensions. Big firms are stealing tens of thousands of pounds from workers' pay packets. They are robbing by stealth. They are taking from pensions, which are a form of pay set aside for the future.
Millions of workers who expect a secure future could find they have little money to live off when they retire. Their pension will be on average 30 percent less than they might have expected. The changes in pension arrangements sound technical-the move from a 'final salary' system to a 'money purchase' one.
But the result is simple-the companies collect billions, and workers must stake their future on a spin of the stock market roulette wheel. Workers on average earnings who have worked for years for a big company hope to retire on a living pension. That is some sort of compensation for the hard grind of a working life. Those expectations have been whisked away for many. Local authority schemes are also coming under pressure. Even the civil service pension scheme is under threat.
Throughout the 1990s companies were perfectly happy with the way their pension funds were going. A booming stock market meant they had to pay in very little to fund workers' pensions for the future. Many firms took a 'holiday' from paying in anything at all or took money out to fund redundancies. Top companies stuffed £20 billion into their pockets by this method.
But the stock market faltered. Managers then realised they would have to pay in much larger amounts to fund pensions. They stampeded to find a way out. In 1995 there were 38,000 firms offering guaranteed pensions. The figure has already crashed to 10,000, and it is still falling.
Companies will save billions by changing their pension schemes. In a 'final salary' scheme a worker is guaranteed a pension based on a percentage (usually two thirds) of their salary when they retire. At present companies pay an amount equal to 10 percent of a workers' wage towards a 'final salary' scheme. That will fall by half. The solution to the crisis is simple.
It would mean taxing the rich to provide a decent state pension. It would also mean workers and pensioners controlling the £850 billion invested in British pension funds rather than leaving them to the bankers and bosses. These are the policies of the Socialist Alliance and the Scottish Socialist Party.
Instead the government is putting more and more stress on people looking after themselves. It is also considering making us all work longer. Women have already seen their working life extended. A woman born after April 1955 will not be able to get her state pension until she is 65. How much better it would have been to equalise it at 60 for everyone.
One recent report recommended the government raise the retirement age to 67 for all. Another report last week suggested it should rise to 72! The Financial Times says that the old way of running company pensions is 'a relic of a long vanished era pre-dating the market mindset that we must all compete until we drop.' Now everything will be about the market.
'Capitalism is all about risk taking. But who takes the risk in large companies? Certainly not the chief executives. Succeed as chief executive and the rewards are huge. Fail and the payoff means you need never work again. At best you will be fantastically rich, at worst filthy rich.'
Strike action pays off
In almost every country of the European Union there have been mass demonstrations and strikes over pensions-except Britain. In Italy resistance to attacks on pensions led to a general strike which was important in bringing down the Berlusconi government in 1994.
In France the public sector strikes of 1995 were partly sparked by attacks on pensions. These strikes transformed the political mood in the country and ripped the guts out of the right wing JuppŽ government, which limped out of office 18 months later. In Germany mass protest over pensions helped to bring down the Tory government of Helmut Kohl.
In Greece there was a huge general strike over pensions last year. European unions have fought, which is why European workers generally have better pensions than in Britain. Disgracefully, many British union leaders have been silent or compliant as pensions have gone to the wall.
Now Sir Ken Jackson, the leader of the manufacturing union Amicus, has spoken out. But he denounces the government for taking too much from the bosses by altering corporation tax law. Jackson is attacking one of Gordon Brown's very few moves which is actually a change for the good. Instead of supporting management, Jackson ought to be attacking the privatised pension system. Some 200,000 members of Amicus were hit by the Equitable Life disaster.
Leaders of the Unison, TGWU, CWU and GMB unions have all attacked what is happening. They need to start campaigning for action for a decent state pension.
State or private scheme -they're all under fire
UNLESS YOU are rich, your pension is under attack. The assaults on 'final salary' schemes hit workers who are in company schemes. But others are also suffering.
Ten million people rely entirely on the basic state pension. This is falling compared to average wages every year because of changes made by the Tories and continued by New Labour. The basic pension is now £72.50 a week for an individual and £115.90 for a couple. If the link between pensions and wages had not been abolished it would be £101.15 for an individual and £162.10 for a couple.
As the basic pension declines, the government has pushed everyone to take out a second, private, pension. The government-approved ones are known as stakeholder pensions. This is where pension contributions are staked on the stock exchange, and the final amount is at the mercy of its ups and downs. Just 37,000 of Britain's five million lowest paid workers have signed up for a stakeholder pension, according to research by the Low Pay Unit and the National Pensioners Convention. Most workers simply cannot afford one. Pension consultants estimate that to retire on half your final salary, a 30 year old today would have to put aside a quarter of their wages every month. Tom Ross, the head of the government's own advisory body on pensions, said that if he were a low or medium paid worker he 'wouldn't touch stakeholder pensions with a bargepole'.
People who have been conned into taking out private pensions are finding that the promises of future prosperity are a lie. Last year Equitable Life told one million policy holders that payouts would fall by 16 percent. Other firms have made similar announcements.
People who work in areas that have been privatised or contracted out often find their pensions are some of the first benefits to go. One exception to the trend of pension decline is MPs themselves. They have recently voted to boost their own pension contributions by 20 percent, with the taxpayer providing the cash.
Companies bailing out
Firms which have already closed their final salary pension schemes for existing or new workers include:
Abbey National, Alliance & Leicester, AstraZeneca, Barclays, Boots, BG Group, BT Group, Cable & Wireless, Cadbury Schweppes, Celltech, CGNU, GlaxoSmithKline, GUS, HBOS, Hays, HSBC, Iceland, ICI, Legal & General, Lloyds TSB, Man Group, Marks & Spencer, WM Morrison, Next, Northern Rock, P&O Princess Cruises, Rentokil Initial, Reuters, Royal & Sun Alliance, Sainsbury's, Schroder, Scottish Power, Standard Chartered, Tesco, Whitbread, and WPP.
These bosses have no worries about the future. Their expected annual pensions are: Dr Jean-Pierre Garnier (GlaxoSmithKline) £833,000, Sir Dominic Cadbury (Cadbury Schweppes) £386,000, Hakan Mogren (Astra Zeneca) £447,876, Bob Scott (CGNU) £419,000, Lord Blyth (Boots) £392,000, Sir Iain Vallance (BT) £344,177, Peter Ratcliffe (P&O Princess Cruises) £300,000, John Gildersleeve (Tesco) £309,000.