Over five million private sector workers face big cuts in their pensions because the government has changed the way that increases are calculated.
Pensions minister Steve Webb announced last week that private pension providers will only have to increase payouts by the Consumer Price Index (CPI) rate of inflation, rather than the Retail Price Index (RPI) rate.
This seemingly technical switch will mean poverty for millions. Since 1988 the average annual RPI rise has been 3.8 percent. But the CPI rate has gone up on average by just 2.8 percent a year.
So the change means that over 20 years a worker would lose £10,367 on a £5,000 a year pension.
Accountants KPMG say the move could reduce private sector pension promises to workers by around
Laith Khalaf, a pensions analyst from the financial advisers Hargreaves Lansdown, said, “This may be great for pension schemes but as usual that means it is absolutely terrible for pension scheme members.”
The government had already announced a similar change for public sector pensions in the June budget.
Now it is coming for all pensions—public or private sector.
Two thirds of private sector workers already get no employer support towards a pension.
Meanwhile, the bosses have awarded themselves some of the biggest pensions increases.
The TUC Pensions Watch report showed that between 2007 and 2009 the average value of a pension for a director of a FTSE 100 company went from £3 million to £3.4 million.
In 2007, the average yearly amount received by the top boss in each company was £147,000. By 2009, it had grown to £179,540—a rise of 22 percent.
And the majority of directors got to retire at 60.
Public and private sector workers must unite to defend their pensions, jobs and living standards.