Frontline volume 2, issue 1.

Last Stand for Pensions

Catriona Grant is an activist in Unison and the SSP. In this article she looks at the battle for pensions and how the unions have reacted.

It should come as little surprise that improvements in living conditions and nutrition have resulted in a population that is living longer than ever before. In Scotland the percentage of the population above pensionable age is estimated to increase from 17.9% (in 1998) to 24% by 2036. It seems that the rewards for the increased lifespan of Scots are negligible in the extreme. Instead they are disadvantaged in many ways and are seen as a burden to be borne by the younger generations. Older people live in poorer housing than the population as a whole. They are more likely to experience poor health, and are the greatest consumers of health and community care services. They live on lower incomes, and the gap between the wealthiest and poorest pensioners is the greatest it has ever been.  Everything around us seems to be built and designed for the young, able and economically active.  Transport services are car dependent or commuter oriented, excluding many older people. Pensioners from minority communities or with disabilities are doubly disadvantaged. Age discrimination and age prejudice excludes older people from many parts of society, while some are further excluded by virtue of being dependent or incapacitated.  The active exclusion from society of older people is constantly happening, yet makes little sense. Why, after all, would this society want to exclude nearly a quarter of our population?  On a more positive note, issues of age and ageing are becoming increasingly relevant in the public and political arena. Older people are becoming much more vocal, with a willingness and ability to use their political and financial muscle. The sheer volume of older voters logically means that they will have greater political influence, while a significant proportion of retired people also have the means to exercise real consumer power.

Pensions Crisis

The so-called “pensions crisis” is making even the youngest of workers think of their future as an older person. Britain, whilst being the fourth richest country in the world, has amongst the lowest pension rates in Europe. To properly reform pensions, the way we view public funds requires reconsideration. Taxation is not enough; we need to make a direct call on companies to release some of their profits and shares to the state pension pot. The wealth is there, but it is channeled wrongly – into the pockets of big business fat cats and away from workers, young people, disabled people, the unemployed, children and retired people.  The government’s pension policy is in a mess and this is because it counted on the private sector rather than its own means.  To the government, it seems that pensions are all about investments in shares, oil, and the arms industry, not about saving and redistribution of resources from those with plenty to those that need it.   The government wants us all to have a stakeholder pension; it wants stakeholder pensions to provide 60 per cent of all retirement incomes in future decades, compared to its present level of 40 per cent. The pension legislation in 1999 was based on the assumption that millions could be tempted to take out a commercially provided stakeholder pension, and that existing occupational and private schemes would also continue to flourish. All this, it thought, would allow the contribution of the state pension to overall retirement income to continue its steady decline. This was little more than a neo-liberal pipe dream. Private provision has been badly hit over the last five years, and the stakeholder idea has not been a success. The decline of the stock market has hit all pension fund values. Withdrawal of tax relief for pension fund dividend income also affected them adversely. The Contributors “holidays”, A.K.A the theft of worker’s pension funds, has shown that pension funds are under-subscribed and struggling. It is theft and fraud that has caused this and not workers living longer, despite government, big business and media protestations.

Gambling with our Future

Pensions should be worker’s deferred wages and not a gift from benevolent employers who gamble on the stock exchange – they tell us if you want a decent pension at retirement you’ll need to invest more, pay more, work longer, expect less.   Private businesses have decided they cannot afford pensions, as pension funds are a drain on their profits and are sometimes worth more than the company themselves. Thousands of companies have been closing their occupational “defined benefit” schemes, alarming the eight million employees who are still members of such plans. BT, The Abbey, Marks and Spencer and Iceland are amongst the latest to close them down. Under the “defined benefit” formula the company promised to pay a pension specified as a proportion of final salary, or an average of the five best years, or a similar formula that was in the best interest of the employee. With the schemes frozen or closed, employees are invited to take out an individual “defined contribution” scheme. With these, the benefit to be paid out is not specified; it depends on how the funds perform on the market and the employer makes a much smaller contribution. In short, such schemes provide no certainty of a realistically viable pension, and leave a plausible fear of a future lived in poverty. The employer’s responsibility is neatly removed as such schemes fall under the private pensions banner, providing them with an immoral but financially lucrative way to wash their hands of any responsibility to their ex-employees.  Millions of worker’s pensions have been greatly reduced. The problems at Equitable Life, where 800,000 policy holders saw their pension funds lose 18% of their value because of a managerial miscalculation was another blow to boost confidence in private provision. Private pensions just don’t work; they are a capitalist swindle based on gambling, moving money around and wishing for higher returns. As if all this was not enough, the problems of private provision were also highlighted by a collapse in annuity rates, caused by increased life expectancy and lower interest rates. In the mid-1990s a pension fund of £50,000 would buy a retirement income of £4,000 a year; today it secures only £2,500 a year. But big business profits are not reducing; they are simply not willing to pay out in proportion to the pension funds they gamble on. Living longer means the fat cats get to gamble more with your money, only to sentence you to pensioner poverty in your old age.

New Labour Schemes

Britain’s state pension is the lowest in Europe, standing at a paltry £79.60 a week for a single person and £127.25 for a couple. The Family Budget Unit has calculated that older people need a minimum of £99 - £125 per week to pay for basic necessities. Our state pension is not linked to earnings and hasn’t been since 1979 so every year it falls further and further out of synch.  The only silver lining in the dark cloud that is the pensions field is the public sector occupational schemes.  If left unhampered by government policies they are trying to push through in 2006, they still offer a good enough deal to employees.  But since we live in a race to the bottom neo- liberal world, the greedy have an eye on our pensions, and propaganda on divide and rule has put private sector employees against public sector employees. Since the New Labour government has decided they can no longer afford public sector pensions it would seem that the end is also in sight for these schemes. The government has introduced a Pensioners Credit to the tune of £2 billion a year. However pensioners groups are less than happy with the measures and have labeled it, “furiously difficult to understand.”  Pensioners are treated equivalently as high earners, taxing the first pound of pensioners’ savings income at 40 per cent! How can this be deemed as fair?  State pensions have to be linked to the advance of average earnings. The Labour Party conference in 2000 supported this principle but the government, after the disaster of the 75p pension increase in that year, tried to palm them off with a one-off boost but no commitment to the earnings link. The New Labour government argues that the state cannot do more because its revenues come from a static labour force while the number of pensioners, because of increased longevity and the retirement of the postwar baby boomers, is set to double over 30 years.  But in truth the labour constraint argument is not the case because it would always be possible to employ more of those pressurised out of the labour market- including older workers- and because a more welcoming attitude to immigration could remedy remaining shortages. How many able asylum seekers live in poverty scraping an existence of NAS support or unjustly incarcerated in detention centres throughout Britain desperate to work and study and be part of the British economy?  And how many illegal immigrants, trafficked women and people working in the underground black market in fear of detention and deportation would rather work in PAYE work places, contributing to tax and National Insurance and having a life rather than an existence?  Our racist immigration legislation illogically does not allow this. At present, compared to the free market, National Insurance remains a very cost-effective way of raising money for a decent basic pension. It is without all the charges and marketing spend of the financial services industry: even with restrictions the stakeholder pension charges are much heavier and therefore costs the contributors more to maintain.

Means Testing

The pension credit scheme is ridiculously complicated and has extended means testing to as many as six million pensioners. The stake holder pension are not doing too well and many will find at retirement they will still be in need of the State pension. Pension credits seem too complicated and a big mess – why do we need private pensions, occupation pensions, public sector pensions, stake holder pensions, state pensions and pension credits – why is there not just a guaranteed income for all pensioners?  It seems archaic and chaotic, and not what anyone would wish for when planning for their future. Restoring the state pension to earnings would mean the weekly pension of a single person would rise from £79.60 to £110. This would be an increase of 28% on current rates, but according to the Family Budgeting Unit would still be the equivalent of being able to afford necessities only.  It is in reality £5,500 a year: the basic pension surely must be at least double this?

Paying for Pensions

The problem is that there is a limit to what can be set aside for future pensions from current NI and tax income. Current revenue should be spent first on today’s pensioners, on the educational and health services, and on the programmes directed at reducing child poverty and rescuing the NHS. The government would need an elastic purse if it were to pay for everything it believes it needs plus Trident, the occupation of Afghanistan and Iraq and all the other things it feels are essential to the good of this society and the world at large. In the past, socialists did not see taxation as the only way to raise resources for social expenditure, but also counted on public ownership. The slogan “tax the rich” really is not good enough: we need to own what the rich have too.  Let’s have a tiny glimpse at what they do own. In Scotland alone the five main high street banks make £34bn profit between them; and the two oil companies who gained £28bn from taking a “pensions holiday” at the height of the stock market boom a whopping £2.5bn. These obscene profits are obviously going into someone’s pocket. Why not redirect them to the pocket’s of their retiring employees?   Re-nationalisation and/or public ownership appear to be ideas of old, but unless we own the means of production, the government will be forever tugging its forelock to the rich and powerful, trying not to rock the boat, thanking them for the pennies they get from taxes and telling the majority – the workers, the pensioners, the young, and the disabled to be thankful for what they have and for small mercies.    However, even in this decrepit capitalist world, reforms can be made to ensure there is a decent pension for all. In Sweden, for example, they introduced a share levy in the 70s - Rudolf Meidner’s regional “wage-earner funds”. All public companies were required to issue new shares annually, equivalent to 20 per cent of profits, and contribute them to regional social funds. Over the 10 -15 years it existed it raised large sums and paid for many of the reforms Sweden was renowned for. However, later, the Social Democrats reduced it to 3% and refused to entrust the funds to democratically accountable regional bodies as Meidner had proposed. In the early 90’s the incoming conservative government abolished the share levy and the remaining funds were used to set up a series of research institutes.  A share levy introduced in Britain could restore the vanishing employers’ contributions. It would not subtract from companies’ cash flow or create problems for their bottom line (the problem with defined benefit schemes when the stock market is down). It would work like “share options” but would do so in a fair way, benefiting everyone. Unlike corporation tax it could not be passed on to the consumers in higher prices. It could not be used to finance current expenditure but as demographics shift it could gradually be brought into play. Individuals could save for their future if they desired to and it could be used to boost secondary pensions to carers and those on low incomes.  But until there can be new thinking on pensions we must defend the pensions we have. The government has proposed to cut public sector pensions, withdrawing the right to retire earlier, and the removal of final salary pensions with a plan to replace them with average salary pensions.

Strike Action

After to-ing and fro-ing between the public sector unions, strike action was called off in March 2005 just before the Westminster elections. The PCS took action at the latter end of 2005 and the government gave in and conceded that workers in the public sector can retain their rights as long as they were a civil servant, a NHS worker or a teacher – e.g., they were an existing worker in these services.  The rest of public sector – the social workers, the bin men, the Probation Officers, the ferry captains, the bus drivers, the firemen etc, could go to the proverbial pensioners hell and give up their hard won pension rights and conditions.   The ballot by 11 unions was overwhelmingly for strike action and the strike was called for 28 March – the biggest since the General Strike in 1926 where 4 million workers took to the streets.  Over one million local government workers, 250,000 of them in Scotland, (70% of which were women) went on strike to defend their pensions. Yet despite the unity throughout Britain, the increase of union membership, and the trade union action to defend our pensions, the union leaders involved decided to suspend further strikes on the promise of talks with the employers. But what were they suspended over?  The employers didn’t ask for the strikes to be called off before entering talks, but Brendan Barber, The TUC General Secretary, brokered the peace formula – instead of waving a red flag of unity he waved a white flag of defeat.  Talk about lions led by donkeys!  In Scotland the Scottish Parliament has devolved powers over local authorities and therefore has powers over the pensions. Yet the British wide unions did not negotiate with the Scottish Executive, only Westminster.  Tom McCabe, the Minister for Finance, will collect a pension of £14,500 a year for eight year’s service as a bloated MSP, yet is willing to condemn a low paid woman worker for a lifetime of back breaking work to retire on a pension of £1612 a year, claiming that his hands are tied regarding public sector workers.  Deal

It looks like there may be a deal most workers can live with that will provide protection to the 1.2 million existing members of the Local Government Pension Scheme (LGPS) but will mean giving up on the Rule of 85[1] and the pension rights of future employees.  The actuaries had already indicated that the ‘savings’ from the abolition of the “85 year rule” would be £8 billion. The cost of allowing existing scheme members the right to retire at 60 without it cutting their pensions by 30% (as the government is proposing in making its changes to the scheme) would be some £5 billion, so the government saves £3 billion. However, this seems an over estimate as the Rule of 85 is not compulsory, not many workers qualify for it and many that do prefer to work until they have accrued their full pension qualification.  But the armed forces and the Fire Service have a Rule of 80 and Police have a Rule of 75, so how does the government explain that?  It is understandable why most Fire Fighters, Police Officers and soldiers retire younger than those in sedentary occupations, but that doesn’t mean that those not in these services should be obliged to work even longer. But let us be clear – the deal is not guaranteed, so why was the strike of 25 - 27 April 2006 called off?   The union leaders are telling us that the employers are ready to make the “concession” but not until June 2006.  Why?  And if we have to wait until June, why did we not keep the pressure up from the time of the strike?  According to UNISON rules – the biggest union involved- there does not need to be a ballot as to whether to accept the employers offer but what union members have to demand is there will be full consultation with the members before any deal is signed. The Financial times on the 13th April 2006 stated the strike was called off to “spare the Labour Party embarrassment in the run up to the local elections at the beginning of May”. It would appear that such a gesture was completely futile given Labour’s poor showing, losing an embarrassing amount of councillors and council majorities.  It seems that the unions seem to feed the beast that bites them.  The New Labour government wants to make concessions to big business and the corporate fat cats but not to the trade unions or the workers, and the union leadership appears to be on the sidelines cheering them on. It is mass action that has and is forcing concessions from employers and government, not perfidious hand- shakes or the pretence of having ‘influence’ with the New Labour government. Without the strike action we would have nothing to negotiate with. The government and the union leaders received an overdue shock from the spectacle of more than 1m workers willing to take industrial action to fight for what was rightfully theirs.  The trade union leaders took fright and poured cold water on the fury and went cap in hand to the government with a little promise of something else.

French Lessons

In France the trade union leaders did not have control of the movement against changes in youth employment practices and Brendan Barber called off the action as the French youth and workers took control.  At my work place one (older and usually reserved) social worker said to me “we should take action like the French”, I replied with revolutionary fervor, “all out strike?” he said “No! Turn the country upside down until we get what we want”… the French could have been an inspiration to all strikers.  The Daily Mail described the stalemate as a “climb-down” by the government in face of “strong arm union tactics”. Channel Four News mustered aggrieved private sector workers who wanted to pull down public sector worker pensions to theirs calling them “greedy” and “selfish”.  The average pension for a UNISON woman worker is £31 a week.  Selfish and greedy? Pitiful and ripped off seems a more accurate description.  Women workers are already low paid, and paid less than male workers despite the Equal Pay Act of 1970. In 1920 Poplar Council, led by George Lansbury, paid women workers equal pay to men’s wages: and that was 86 years ago!  Unequal, low pay equals unequal, low pensions.  Without a doubt, if workers did not fight for their pension rights the government and the employers would do everything in their power to remove them.  It has not just been the public sector that has been fighting back but those in the privatised companies too – Scottish Power TGWU threatened industrial action at the end of 2005, and staved off attacks on their pension rights for the present time at least.

A Future Worth Living For

But as socialists we need to not just fight the existing battles but the battles to come.  The idea that pensions are in crisis is a neo-liberal fantasy. The real issue is that pensioners are in crisis, and they need to be taken care of and provided for in order they can enjoy their retirement from wage slavery and poverty. Yet in Scotland alone the death rate for pensioners increases every winter by 2,760.  37% of Scottish pensioners spend 10% of their income on fuel alone and 25% pay more than 20% of their income (extreme fuel poverty).  In Scotland 29,790 pensioners have no central heating and pensioners are twice as likely to live in fuel poverty if they own their homes or privately rent as opposed to those who live in housing association or council housing.  Statistically, the decrease in social housing is therefore likely to mean more pensioners suffering from fuel poverty in the future. Retirement should be the golden key to freedom from wage slavery and a time of freedom to pursue leisure, time with family and friends and enjoying the world around us. It should also be a time to be involved in politics and common struggles and to be free from what Paul Lafarge in 1883 called in his pamphlet “The Right to be Lazy” the “freedom of the delusion of work”.  Yet in the 21st Century pensioners do not have the pleasure of leisure but the fear of poverty, living off charity and benevolence, dying in cold and having to work longer and longer into old age in order that the profits of the rich and powerful are channeled into their leisure pursuits and their true laziness and accumulation of stolen wealth.  The rich and powerful want to be protected from the selfish and greedy worker with the audacity to live to old age and want a decent standard of living. The questions for trade unionists, socialists, workers and pensioners is how do we fight for our pensions, decency and dignity in old age and the need to organise for a minimum basic income for all?  How do we build that unity in order to discuss these issues and pressures?  The debate, ideas, and collective unity need to rage on.  We need a future fit for the pensioners we are, or one day will be.


[1] The Rule of 85 is where the length of service plus the age of the worker equals 85 they can retire on the pension they have accrued i.e. a worker starting for the local authority at age 20 works (with unbroken service) until 53 can retire.  33 years work + 53 years of age =  86, qualifies to retire on their accrued salary i.e. not their full salary they would get at 60 with 40 years contributions.