The sell-off, or potential closure, of Tata Steel will affect not only the 14,000 current UK steel workers but also at least 110,000 former steel workers. All former workers will have their pensions reduced.
From the 70s onwards, occupational and private schemes were promoted as a means to take pension out of the hands of the state and away from any argument for democratic political control. There was the added ideological benefit for capitalists — the health of the pension fund, the chase for high profits and all that goes with it, could be presented as being in the future pensioners’ interests.
A sop was given to trade unions with occupational pension schemes. Trade union representatives was allowed on the board of the trustees of the funds. However very little advantage was ever taken of that— either to ensure ethical investments or to hold businesses to account. Indeed some companies, most infamously the Mirror Group with its former CEO Robert Maxwell, plundered the pension funds for their own business ends. Mirror Group workers lost up to 50% of their pension entitlement in the 1990s.
In 2005, Blair’s government brought in the Pension Protection Fund (PPF) following increasing concern about the solvency of many pension schemes. Insolvent pension funds could be passed over to the PPF; pensions would continue to be made available but workers suffered losses of 10 to 20% of their entitlements. On this occasion the government is suggesting that greater power be given to the Trustees to reduce the steel pensions than is currently allowable by existing Tory law. They want them to be able to make unspecified changes to the pension scheme without needing to consult the members.
The pension fund trustees say that the results will be better than under the PPF. But clear proposals about possible changes are not being made explicit — other than a change of inflation measurement — a switch to the Customer Price Index (CPI) from the Retail Price Index (RPI). The desired saving of £200 billion before 2030 seems unlikely to be made by such a measure. The government has started a tokenistic consultation exercise in which they claim they will make sure that the pension scheme has changes “in the best interest of the scheme members”. But what guarantee is that?
This government is clearly not to be trusted. The scheme is under pressure to not obstruct the selling off of British steel-making capacity to yet another foreign investor. There is no certainty that the sell-off, if it goes ahead, will not lead to closure or another sell-off. There is a very real threat that other pension schemes will be similarly “legally enabled” and then compelled to follow the British Steel scheme example and negotiate down pension entitlements under market and closure threats. The labour movement needs to articulate an alternative pension policy. Although the principle of a PPF is better than government steel pension plans, it is a poor safety net with unjustified losses for the workers. We need a rejuvenated state pension scheme, pulling in the private pension funds, ending the vulnerability and manipulation that comes from the market, ending the huge inequalities in the income of pensioners.
