The UK’s pension fund bosses control about £600 billion. Meanwhile the basic state pension has been progressively run down so that today, at £79.60 per week, it is only 15% of average earnings. On present trends it will be down to 10% of average earnings by 2020.
The New Labour government’s latest effort to patch up the scandal, Pension Credit, sets a floor income of £105.45 for pensions, about 20% of average earnings.
Even the end-of-welfare USA has a basic state pension at 25% of average earnings.
Now employers are shutting down the final-salary pension schemes which promised more security and comfort to at least a section of the working class, those in regular employment in large companies and the public sector.
The message of the new global free-market capitalism to us all is: find some financial scheme or manoeuvre to save for retirement, and hope it doesn’t go bad as so many others have – or rot in poverty when you grow old.
Inequality has been rising fast among those of working age. It is rising, and is set to rise, even faster among the retired. A well-off minority retire in good health, with an income not far off what they received when they had greater expenses. They can enjoy themselves, travel, and help their grandchildren pay university fees or buy their first house.
A larger number retire in poverty and, often, in poorer health because of the harder jobs they have done. All they can do on their pensions is survive. They watch their grandchildren struggle in SATs-ed and Ofsted-ed schools, lacking in qualified teachers, through to jobs in McDonalds.
According to the government’s own figures, up to 13 million people “may want to consider saving more, working longer, or a combination of both” if they want any comfort in retirement. In fact, many of those 13 million do not have the option: their wages are not high enough for them to save, their health is not good enough to work longer, or they can’t find decent jobs even if they are healthy.
For a civilised and equal society, everyone needs to have the right to a liveable pension. To win that right requires a political battle against the powers of high finance which rule that £600 billion pension-fund pot.
But instead of fighting the new global-capitalist pensions regime, the TUC has tried to find its own niche in it. It launched its own “stakeholder pension” scheme in 2001, in collaboration with Prudential. The Prudential bosses should make £7 million from this, in fees. What do workers get from our union leaders trying to emulate the capitalists at their own game?
Nearly two-thirds of the UK’s top pension funds have closed their final-salary pension schemes to new employees. Once a company has succeeded in dividing workers in this way, it becomes easier for it to worsen conditions for the “lucky” older workers still in the final-salary schemes.
The older pension schemes guaranteed workers a pension at a level tied to their wage in their last years before retirement. The newer ones are “defined contribution”.
Workers have to pay in just the same.
Employers pay in much less. The pension you get at the end is not guaranteed, but depends on the fortunes of the stockmarket. In other words, the workers bear the risk, not the bosses.
In the 1980s, the Tory government pushed “personal pensions” as the alternative. Workers should not be tied to one employer for their pension. They should get on their bikes around the labour market. But then they should rely on individually-arranged personal pension schemes, not the state pension.
The insurance and financial companies selling those “personal pension” schemes bamboozled people into opting out of good employer-run schemes. They took huge rake-offs in commission and fees, so that people withdrawing from a personal pension scheme, for one reason or another, often found that they had done much less well than they would have done by just putting the contributions they had paid into a bank account.
More recently, the giant insurance company Equitable Life nearly went bust, and cut the pensions it paid out. An official report said that the crisis was caused by “dubious” practices by the management, who had nurtured a “culture of manipulation and concealment”.
But these are the options for workers: a dwindling state pension; dubious and risky personal pensions, which many workers cannot afford anyway; or the relatively secure final-salary schemes of big employers, which have never been available to more than a minority, and are now being torched.
This chaos makes sense for some. The steady rise of ever-larger pension funds has been a major motor in the reshaping of global capitalism over the last twenty or so years.
Larger and larger flows of cash circulate around the stock markets and the foreign exchange markets. The system becomes more and more finance-centred, more and more geared to short-term profits, dividend payouts, and share prices above all else.
Privatisation and the cutting of top tax rates are part of the same development. There are huge vested interests tied up in it, making huge profits from the commissions, fees, bonuses, and speculative gains they siphon out of the “casino economy”.
The unions should not try to join in. We should fight against this system, and for an alternative of democratic social provision.
We should fight for a workers’ government which will take all the pension funds into public ownership – without compensation to the financiers – and put them under democratic control, using the proceeds to level up pension provision with a proper guaranteed minimum. It will tax the rich and big business as much as is necessary to maintain the provision.
That requires political action, on a much bolder scale than the tentative new gestures from some union leaders in recent years.
The AWL is working within the trade unions and in electoral politics to establish a clear socialist alternative, and to rally the unions for a battles within the Labour structures to break them from Blair-Brownism; to fight for policies like repeal of the anti-union laws, taxing the rich, and decent pensions for all; and to rally the forces which can create a workers’ government.