Ministers and employers are gearing up for yet another assault on our pension rights – including renewed attempts to raise the retirement age – and we need to prepare to fight back.
The latest attack on pensions comes from the right wing press. The Daily Mail is up in arms over the supposed “pensions apartheid” that privileges workers in the public sector over their private sector counterparts.
What really upsets the Mail is the very existence of pensions schemes that guarantee at least a modicum of security to workers. They want these schemes scrapped for all workers – public and private alike.
In fact the situation is already deteriorating rapidly. Some 10.3 million workers belonged to a occupational pension scheme in 1995. That figure has now dropped to 8.8 million.
These schemes generally include benefits such as life insurance – providing security for the husbands and wives of those who die while still in work.
Most of them link the pension they pay out to the level of wages earned by the worker during their time in employment.
In contrast, about 3.7 million people in Britain pay into so called “defined contribution” pensions. Unlike final salary schemes, these do not guarantee the level of the pension they eventually pay out.
Instead they purely depend on the performance of the fund’s “investments” on the stock market. Employers prefer these schemes because workers shoulder the risks of share prices going down instead of up.
The global economic crisis has seen share prices plunge in recent weeks. That has hit the value of defined contribution pensions hard – the total pot has dropped by nearly a third from £552 billion this time last year to £395 billion now.
Meanwhile an estimated £226 billion has been wiped out from final salary schemes in the past 12 months, leaving hundreds of companies facing potentially ruinous deficits.
Of the 200 biggest schemes in Britain, nearly 130 are already in deficit. Now the pressures are growing to cut back on what these schemes will pay out.
John Lawson of Standard Life believes that the turmoil on the stock exchange will lead to “unpleasant” pension renegotiations in future. “These conversations have not happened yet. They may be six months off,” he adds.
That means employers will try to change the terms of pensions in order to pay out less. They will also try to push up retirement ages and shut schemes to new entrants – or close them altogether.
These pensions are part of our wages, which just happen to be deferred until retirement.
The fact that our money has been lost on the casino of the stock exchange is not our fault – but we will be expected to shoulder the cost.