Socialist Worker

Pensions crisis myth exposed

Issue No. 1970

Unions have recently called for a wider scheme to compensate workers who have lost pensions — like the APW workers who protested last year (Pic: Guy Smallman)

Unions have recently called for a wider scheme to compensate workers who have lost pensions — like the APW workers who protested last year (Pic: Guy Smallman)

The government is soon going to attack everybody’s pensions — on this question Gordon Brown and Tony Blair are united as one. A consensus has emerged between Labour ministers and big business that we must all work harder and longer to deal with the “pensions crisis”.

That was summed up at a meeting this week at the Labour Party conference addressed by the trade secretary, Alan Johnson, and the director general of the bosses’ CBI organisation, Sir Digby Jones.

Jones relished his opportunity to lay into workers, demanding, “The government must face down the unions.”

“The ‘I’m alright Jack’ attitude of many public sector union officials really is showing itself,” he said. “The government must grasp the nettle on public sector pension reform.

“It will not get away with publicly declaring its intentions for a second time and backing down at the first sign of trouble. Bringing the retirement age up to 65 is hardly ‘working ‘til you drop’.”


The government agrees. Ministers insist that increases in life expectancy mean we have to work longer, pay more taxes or accept lower pensions — or more likely all three.

Yet the truth is now out. There is no pension crisis, or at least it is not the one the government describes.

A report this week confirmed an argument that Socialist Worker has repeatedly made — that conventional assumptions about a future pensions crisis are wrong.

The report, prepared by thinktank Tomorrow’s Company, disputes the significance of the “old age dependency ratio”.

This is the ratio of the number of people over 65 years old to those under 16 years, which is set to rise by 42 percent by 2041.

But just as significant is the total “economic support ratio”, the ration of the number of people not working to those in work. This is set to rise by just 1 percent.

Based on this measure, more generous pensions could be provided without significant tax increases, the report argues.

Furthermore, it says that efforts to address pension shortfalls through savings are largely misguided.

Too many of those who do not save are simply too poor to put money aside.

Phillip Mullin, one of the report’s authors, argues that by concentrating on old age dependency ratios, policymakers ignore the fact that workers are already supporting a wide variety of non-workers—caring for young children, students in college and the disabled, for example.

While the proportions of different groups of non-workers may change over time to include more elderly and fewer children, the overall burden may not be much greater than it is today.

“Despite the fact that it is so often quoted, the old age dependency ratio tells us nothing about the economics of an ageing population,” Mullin says. “It is misleading to the point of being meaningless.”

None of this has held back the attacks on public sector workers. Last week the local government employers, encouraged by Labour ministers, unveiled plans that were worse than those that caused uproar just before the general election (see details below).

More assaults on millions of public sector workers are coming — and causing turmoil.

Dave Prentis, general secretary of the Unison union, was to tell Labour’s conference this week that he has never seen his members so angry and that “unless the prime minister and the government wake up to that fact, they will face the biggest strike since 1926 in a matter of months.

“Local government and health workers never went into public service for the pay, perks or bonuses, but one thing they were able to rely on was an adequate pension.

“They had a contract with the government — or so they thought — to enable them to retire with a pension which provided security.

“They paid into their scheme and now they see it being snatched away.”

Unless New Labour’s plans for local government workers are withdrawn there should be a ballot for strike action across the public sector.

There is no time to waste in preparing the resistance, and trade union leaders have buckled too often to pressure from Labour ministers to be trusted to fight hard enough.

Activists on the ground should start building up the pressure for a real fight:

  • Set up local meetings of public sector workers to co-ordinate a mass campaign of information about the attacks, to shatter the myths they are based upon, and to pressure union leaders to fight.
  • Circulate petitions at work opposing increases in the pension age and reductions in benefits.
  • Demand that there is a union-backed national demonstration before Christmas in defence of pensions.

'I don’t see management taking pension cuts. Why should we?’

An overwhelming vote for strike action earlier this year saw the government withdraw plans to abolish the “rule of 85”, which allows workers in local government and a range of other public services to retire early if they are 60 or over and have at least 25 years service.

At the time, the then works and pensions secretary, Alan Johnson, called for a fresh start and real negotiations on pensions across the whole of the public sector, saying, “I think we need to take the time to get this right.”

But at a meeting last week, local government employers in England, Wales and Northern Ireland proposed:

  • Abolishing the rule of 85 from 1 April 2006, arguing that it will breach new age discrimination laws that come into force next year.
  • No transitional protection for existing scheme members who will be disadvantaged.
  • Two increases, each of 1 percent, in employees’ contributions, to be phased in on 1 April 2006 and 1 April 2007.

They also want negotiations to be concluded by mid-October. Anne Cohen, a local government worker from east London, told Socialist Worker, “I worked for 28 years as an admin assistant for the council. But my pension is less than £3,000 a year.

“It’s not a princely sum but at least I collected it at 60.

“I have friends now who expected to get their pension at 60 but are hit on the one hand by the government raising the pension age for women, and on the other by talk of public sector workers having to work until they are 65.

“I don’t see ministers or management taking pension cuts. Why should everyone else?”

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Sat 1 Oct 2005, 00:00 BST
Issue No. 1970
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