The bankers who leech off local government workers’ pensions are demanding cash from cuts-hit councils to stop them robbing workers’ retirement income.
Bosses at the West Midlands Pension Fund (WMPF) have asked for a “top-up” of £100 million from councils, including £65 million from Birmingham alone.
They say this is to help plug its £2.8 billion deficit.
Over this looms the threat of cutting pensions that workers have already paid into, or increasing the cost of their contributions. The government is reviewing the Local Government Pension Scheme (LGPS).
The Thatcherite think tank Centre for Policy Studies (CPS) is lobbying for it to be scrapped in favour of a cheaper, weaker pension scheme.
But the amount WMPF asked of Birmingham is almost the same as the £70 million “management costs” creamed off by the fund’s financial bosses and their contractors.
Birmingham council has already paid the fund £122 million since 2014—alongside £500 million in cuts so far and £250 million still to come. So Birmingham council leader John Clancy has refused to pay, claiming this means he can use the money to alleviate the cuts.
Sandwell Council worker Sharon Campion is a representative of the Unison union on the WMPF board. She called the plans “outrageous”.
“It’s ludicrous to say our pensions should pay for the cuts,” she told Socialist Worker. “Councils should be fighting the cuts, not robbing money from pension pots workers have been paying into.”
Unison regional officer Mark New said, “The cuts are affecting jobs and services, and now the council is being asked for even more just to keep someone in the City of London in a sports car.”
WMPF is one of 89 local funds within the LGPS. Workers and their employers pay in, then when they retire they withdraw cash.
In the meantime the money is in the hands of unaccountable finance bosses. They contract it out to traders who play with it on the stock exchange to grow its value—and cream off as much as they can for themselves in fees.
It’s like when you go overdrawn and the bank sends you a letter, and charge you £20 for sending it. Fund managers have hundreds of ways of doing that.Sharon Campion
These “management costs” reach a staggering £600 million across Britain—which Unison believes is an underestimate.
Sharon said, “The part we know about is just the tip of the iceberg. It’s this whole murky world of finance.
“It’s like when you go overdrawn and the bank sends you a letter, and charge you £20 for sending it. Fund managers have hundreds of ways of doing that.
“When we were taught about this during pensions board training, I asked the trainer, ‘This is just the City ripping off the fund isn’t it?’ Even he just said yes.”
In theory this makes the fund’s value grow. But the return isn’t much different to what it would be if they were just “passively” invested in a bank or long term schemes.
Pension funds belong to workers. Workers have already paid into them. They represent deferred wages for workers’ labour.
But they are also a glittering prize—and it’s not just greedy bankers and spineless councils who are after it.
The government is consulting on a plan to merge the 89 funds into a few pools of cash big enough for it to raid to fund its infrastructure projects.
Unison is campaigning for transparency and regulation of the new funds.
It wants to hold back the gouging bankers, get a say over investment in unethical industries, and ensure that the bottom line is workers’ interests—not shortcuts for funding government projects.
More than 105,000 people signed its petition to debate this in parliament, but the government remains “evasive”, Mark said.
Cuts have already led councils to play different jobs and services off against each other, with some even polling residents about where the cuts should fall. The WMPS crisis brings pensions into that mix too.
But Mark said, “It’s become a mantra that pension schemes are unsustainable. But this is the sixth richest country in the world—we don’t accept that you can say there isn’t enough to fund local government workers’ pensions.”
United action needed against attacks on private sector pensions
Over 10,000 workers either have live disputes, or are being balloted for them, as private sector bosses attack pension rights.
There is a concerted attempt to reduce bosses’ contributions to pension schemes—putting new workers onto worse schemes, then downgrading the schemes of existing workers.
This means moving workers from final salary to career average salary schemes, or from either of these “defined benefit” schemes that pay a set amount to “defined contribution” schemes with no guarantee.
The Unite and GMB unions are balloting for strikes at Scottish drinks giant Diageo over pension cuts affecting 1,700 workers.
It wants to move workers from a final salary scheme to career average, and close its other defined benefit scheme to new members, leaving only defined contribution.
Unite members at the Atomic Weapons Establishment (see below) have already voted by 92 percent to strike.
A consultative ballot of 5,000 Unite members at the BMW Group of car firms ended on Monday and could be followed by a strike ballot. Bosses want to close the final salary scheme.
It’s the same situation for 1,100 Unite members at Honeywell.
A strike ballot is underway at Gatwick airport where 1,800 Unite members are fighting the closure of a defined benefit scheme which is to be replaced by a defined contributions scheme.
Pensions were behind a three-day strike at Fujitsu in Manchester last week.
Union leaders may be tempted to use strike votes as leverage to negotiate concessions out of individual firms.
Such gains would be fragile in the face of a generalised offensive.
Instead they should call and coordinate action as quickly as possible.
Nothing short of a generalised fightback can restore the right to a decent pension.
Workers plan nuclear strike
Workers at the Atomic Weapons Establishment (AWE) were set to strike next Monday then begin an overtime ban and work-to-rule against an attack on their pensions.
Bosses want to close their defined benefit pension scheme and replace it with a defined contribution scheme.
Workers in the Unite union voted for strikes by 92 percent. Unite has 600 members in a workforce of 4,000.
AWE manages Britain’s nuclear weapons arsenal. It has two sites at Aldermaston and Burghfield in Berkshire, and is a privatised consortium of Lockheed Martin, Jacobs Engineering and Serco.
Its weapons of mass destruction should be abolished. But an attack on its workers won’t help the anti-nuclear cause.
A victory for the AWE workers would be a boost to the broader fightback against a raft of attacks on defined benefit pension schemes.