Pensions are a huge burden on taxation.
At present 5 percent of Britain’s Gross Domestic Product (GDP) goes on pensions. The government’s official statistics say that even in 2050 this will only be 5.7 percent. This is not a crisis.
The real crisis is pensioner poverty. Already nearly five million pensioners, almost half of the total, live on pensions that are so low that they are entitled to Pension Credit to top this up. Even worse, nearly two million pensioners are not receiving this desperately needed cash—often because they are not aware they are entitled to it or find the process of getting it too difficult.
The state pension—which 42 percent of pensioners are entirely reliant on—has been allowed to wither by successive governments, Tory and Labour. It is now less than 16 percent of average earnings, down from 23 percent in 1979.
People with occupational pensions are not hugely better off than those on the basic state pension. The average occupational pension pays out only £4,000 a year. More money could be found for pensions very easily.
Of existing government pension spending, nearly half of it is tax relief on private pensions and rebates for contracting out of the state second pension. The richest 10 percent of taxpayers get 50 percent of this relief.
Cutting this handout to the richest would create more than enough extra funding to pay for more pensioners in the future. Also, the national insurance fund has a surplus of £25 billion. This could go a long way to ending pensioner poverty immediately.
In future, there will be lots more pensioners with fewer workers to pay for them.
The number of pensioners is set to rise from 11 milion to 17 million by 2050. The number of people of working age per pensioner will drop from 3.5 to 2.5 in the same period.
This makes it seem that there will be an emergency—each worker will be paying for more pensioners.
Yet think of the whole population. At present, with a population of about 60 million, around 27 million workers support 32 million others today. The “non-workers” are pensioners, children, students, the sick, the unemployed and so on—and of course many of these people make their own very important contribution to society. During the next 50 years this ratio—27 million supporting around 32 million—will remain about the same.
The number of pensioners will go up, but the number of children in schools is forecast to fall. The government and commentators are whipping up fear by concentrating on just one aspect of population change.
And a simple way to raise the ratio of workers to pensioners is to end unemployment—both officially recognised unemployment of around one million and the “hidden unemployment” of millions more.
People live much longer so it’s unrealistic to retire at 60.
On average, men can now expect to live until they are 75, with women living past 79. Though this is an increase in life expectancy, there are big differences according to what job you do and your wealth. Some workers have barely increased their life expectancy at all. Top male managers can expect to live to an average of 78.5 years—unskilled male manual workers can expect to live only until 71.
From 1972 to 1999, the life expectancy at 65 of a male caretaker increased only 1.5 years. For a female hospital cleaner it did not increase at all. If the government’s proposals go through and the pension age rises to 65, many working people will be faced with a difficult choice. Option one is to go on until they get their full pension at 65—but then have only a few years of well-funded retirement (or risk dying while still at work).
Option two is to have a longer retirement, but spend it in poverty on a pension which is 30 percent less than they would get at 65! And even then, because there is a link between poverty and early death, they might not get as long as they would think.
According to a recent report by the Faculty and Institute of Actuaries, people on pensions of less than £4,500 a year are twice as likely to die early than those getting more than £13,000. Brian Wilson, the chairman of the research working party, said, “A key factor for living longer appears to be the level of income individuals receive in retirement.”
The chronic illnesses of old age hit manual workers up to two decades before their better-paid managers.
A study of 12,000 people by the International Centre for Health and Society at University College London showed that postal workers, hospital porters and admin workers were far more likely to suffer heart disease and mental health problems than professionals. Retiring at 60 on a decent pension is not a luxury for workers. It is the only way to have a healthier and longer old age.
Public sector workers get a much better deal than those in the private sector.
There has been a massive assault on final salary schemes in the private sector. Nearly half have been closed to new employees in the last ten years.
If unions beat back attacks on public sector pensions this will give confidence to those fighting attacks elsewhere. It will also encourage the battle for a proper state system for all.
The gap between public and private sectors can be exaggerated. Not all private sector workers retire at 65. A recent survey by Aon Consulting suggests that over 60 percent of men in final salary schemes now retire by 60 —up from 45 percent in 1985. The type of job you do and the size of your pension determines your retirement age, rather than the sector you work in. Governments have often excused low pay for public sector workers on the basis that pension rights and job security are better than in the private sector. They are not now offering huge pay rises to make up for the cut that increasing the pension age represents.
A good pension scheme has been important for many workers—40 percent of NHS staff recently surveyed said that the pension was a key reason for staying in the job. Attacks on pensions could increase staff shortages in essential services.
If this attack on pensions is not stopped, the government may well come back for more.
Already New Labour has issued a Green Paper proposing further change from 2008. It suggests reducing pensionable pay by taking overtime and weekend pay out of calculations, abolishing final salary schemes and increasing worker contributions without any significantly improved benefit.