Millions of workers will be forced to pay more into their pensions or face poverty in retirement, as reports this week revealed that bosses are planning cutbacks.
Some of Britain’s biggest employers want to use new laws that force them to enrol all their staff into a company-backed pension plans by 2012 as an excuse to slash their spending on schemes.
In a study by the Association of Consulting Actuaries, almost half of those surveyed said they would cover the extra costs of employing new staff by cutting their contributions to existing pension funds and increasing the amount workers pay in.
Many bosses also said they wanted to “level down” their payments to the minimum set by the new laws.
At present, employers pay an average of 6.1 percent of workers’ wages into their pensions. Experts fear that by 2017 this could fall to just 3 percent—the base level demanded by the legislation.
Years of employers’ “contributions holidays” and the stock market fluctuations already endangering many big retirement funds.
Accountants KPMG this week said that almost one in three blue chip companies’ pension schemes is so under-funded that it cannot be restored to health without companies slashing either dividends or capital spending.
The list of firms affected is thought to include BT, British Airways, HSBC, Lloyds TSB and the National Grid.
Most workers in the private sector do not even have a pension. If they do, it is likely to be in a “defined contribution” scheme—which means they have to buy an annuity, which is based on stock market values.
But the madness of allowing the market to determine whether retired workers will endure hardship was further underlined this week by research that showed millions are facing the lowest returns on investments since records began.
Despite saving the same amount of money into their pensions, millions who will soon stop working face the dire prospect of getting about half the income they would have received 15 years ago.
Further evidence that public sector employers are using the growing pensions crisis as a reason to mount attacks on their workers came this week as the London Pension Fund Authority outlined proposed cuts.
The body plays a major role in administering the Local Government Pension Scheme. It wants to cut payouts and raise the retirement age to 66.
Faced with such a barrage of attacks, it is vital that unions in both the private and public sector unite to demand a decent retirement for all.