Socialist Worker

Millions to be left in poverty

by Charlie Kimber
Issue No. 1831

THE GOVERNMENT sent out a clear message this week that nobody should rely on the state pension to look after them in old age. The pensions green paper was published after Socialist Worker went to press, but statements in advance had set out some key elements.

Pensions secretary Andrew Smith repeated his grim warning that people must 'either work longer or save more themselves' if they are not going to be plunged into poverty.

The government is offering nothing for the majority of people who, because of low pay, will never be able to save enough to fund their own retirement. They will be left scrabbling to survive on a meagre pension, perhaps a small pension from work, and means-tested benefits.

Nor are there any new measures to help the millions who see a relatively secure retirement disappearing as employers wind up final salary schemes and replace them with much riskier ones. Behind the pensions debate there is much froth about the decline in the number of young people compared to the number of pensioners.

Andrew Smith says that this 'remorseless arithmetic' makes it impossible for the state to wholly fund a decent pension if we want to retire at 65. The government's own figures, released in November's pre-budget report, show that the cost of pensions is set to fall as a percentage of gross domestic product during the next half century.

It is presently 5 percent of national wealth and is set to be 4.8 percent in 2051. Average life expectancy in Britain has risen throughout this century. It has not been a problem in the past (it should be celebrated) and need not be in the future.

The answer is rising economic productivity - workers produce much more now because of machinery and improved techniques.

The output of the average worker today is twice what it was 50 years ago and will be twice as much again in 50 years time. Funding pensions properly means workers getting their hands on the benefits of rising productivity - in simple terms taxing the rich and big business. Instead of such measures the government has a four-pronged strategy:

  • Work longer: There will be pressure not to retire until you are 70. Even if this is voluntary at first it will be used as an excuse to further undermine the state pension.

    As male life expectancy is now 73, retiring at 70 would mean the government only has to pay out for a short period. Workers, especially manual workers, die younger than average.

  • Go private: The government wants us to take out private schemes such as 'stakeholder pensions'. These are all based on stocks and shares, forcing people to gamble their future on the stock exchange.
  • Sell your house: Ministers are increasingly saying there is not really a pensions crisis because most people will have paid for their mortgage by the time they retire.

    They will be pressured to choose from a range of private schemes which deliver an income in return for giving up your house when you die. The agenda is to work all your life to pay for a house and then end up with nothing.

  • Force you to save: At some point the government may insist that workers have to save a proportion of their earnings, say 10 percent. This would be a massive tax rise.

More and more people see their future in doubt. There have been big strikes in most European countries against pension 'reform' over the last few years. Union leaders in Britain have spent too long pushing stakeholder pensions and similar schemes. We need more resistance and a real campaign for a decent state pension.

Hard up pensioners

The current basic state pension is £75.50 a week for a single person and £120.70 for a couple.

If the link with earnings had not been broken by the Tories in 1980 the pension would now be worth £105.70 a week (single) and £169 (couple). The pension will rise next April to £77.45 a week for a single person and £123.80 for a couple.

  • Nearly a third of pensioners have an income below the official poverty line (£91 a week after tax and housing costs).
  • In 1979 the basic state pension was 23 percent of male average earnings. Today it has fallen to only 16 percent.

MPs' Christmas present

IN JULY MPs voted themselves a big pension rise. They now get one fortieth of their annual £55,000 salary for every year they are in the Commons.

Under these rules an MP who does ten years qualifies for a pension of £13,750 a year. MPs awarded themselves even more benefits this month. The unmarried or same sex partners of MPs will now receive an MP's pension after the MP dies.

This is clearly good - but it is government policy that public sector workers, including firefighters, must pay for such improvements to their schemes out of their own pockets. The MPs had to pay nothing.

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Sat 21 Dec 2002, 00:00 GMT
Issue No. 1831
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