Defending pensions provides an opportunity for joint public sector strikes—but it is worth being clear what sort of pensions we want to defend.
There are a series of sleights of hand to give people worse pensions.
Paying out returns based on the usually lower CPI rather than the RPI measure of inflation is one.
The main attack is based on changing the type of pensions workers have.
Generally speaking, defined benefit schemes guarantee that employers will pay a minimum income on retirement.
Defined contribution schemes, by contrast, shift the onus for payments onto the individual and produce a pension more vulnerable to the market’s vagaries.
Share-based schemes, where workers have to pay in just as much as before but the firm has to pay in much less, are now common.
On average bosses pay half into these schemes than they would to final salary pensions.
Companies have control of the investment of pension funds. That’s part of why pensions are deferred pay: we lend some of our wages to the bosses to pay us back in pensions.
In the boom years many companies took “contribution holidays”—they stopped paying into pension funds.
But even among defined benefit schemes there is an important distinction.
The general trend is to move from a final salary pension to a worse, “career average” one.
Unfortunately, some in the union movement see this as acceptable.
Career Average Revalued Earnings (CARE) is, like final salary, a type of defined benefit pension scheme.
But in calculating the pension, the “earnings” you have in each year of your employment are taken into account and an “average” of all of them is calculated.
In contrast, final salary schemes offer a guaranteed pension based on what your wages are at the time you finish working.
Since most workers’ wages are higher at the end of their job than at the start, average salary over a working life is lower than final salary.
For the overwhelming majority of workers that means CARE will provide a smaller pension.
And that simple fact is why we need to fight for final salary pensions.