Tory attacks threaten all our pensions

Submitted by martin on 17 May, 2011 - 12:57

At its conference on 18-20 May, the civil service union PCS will vote to ballot its members for strikes over the issues of pensions, job cuts, and pay.

Pensions will be the headline issue, and the PCS action is designed to link with teachers' unions, NUT and ATL, which have already decided to ballot.

A strike by all three unions, plus the lecturers' union UCU, which has already balloted, is set for 30 June. Other unions, including the head teachers' union NAHT and the giant health and local government union Unison, talk of balloting later in the year, so bigger strikes could follow in autumn.

In France, in September-October 2010, pensions became the focal issue for a huge wave of protests - including by school students - against the social spending cuts which have followed the 2008 financial crash. Activists will work for the same thing to happen in Britain. In any case, the pensions battle starting on 30 June is not a technical or sectional fight by special groups defending quirky privileges. The unions which take action are leading the way on an issue which concerns all working-class people.

The public sector unions protest against Government plans and measures which:

  • Have already (from April 2011) changed the basis on which pensions, once they start paying out, are uprated for inflation, from "Retail Price Index" to "Consumer Price Index". CPI averages about 0.8% a year lower than RPI. 0.8% a year less, after maybe 20 years of retirement, adds up to over 15% less.
  • Will (from April 2012) increase the pension contributions taken out of workers' wages by around three per cent of wages. The increased contributions mean no improvement in pensions - rather the opposite - so this amounts to a three per cent cut in pay.
  • Will increase the pension age, even for those workers who kept a pension age of 60 when in 2005 the unions won a shoddy deal with the Labour Government making the pension age rise to 65 for new entrants but stay at 60 for workers already in the schemes.

The Government plans and measures hit teachers especially hard, since they are less likely to opt out of their pension scheme than, for example, local government workers, and more likely to build up a long record of service giving them a relatively sizeable pension.

But the issues here affect all workers, directly or indirectly, in one way or another.

The Tory press often says that public sector workers have "gold-plated" pensions. It's more like public sector workers having decent china plates from which to eat a meagre diet in old age while other workers make do with cracked and chipped ones, but public sector pensions generally are better than those (except for top managers) in the private sector. That is because unions are stronger in the public sector, and better able to resist the general trashing of workers' pensions in recent decades.

Worsening public-sector pensions will not help private-sector workers. It will do the opposite. It will push down the benchmark.

The change from RPI to CPI uprating covers not only public-sector pensions but also one element of the state pension (the "State Second Pension"/ SERPS) and all private-sector pensions unless the scheme explicitly mandated RPI uprating. The Government has talked of legislation which would override private-sector pension scheme mandates and impose CPI uprating on them even if the scheme previously specified RPI.

The increases in pension age affect everyone. The Labour Government already set plans to raise the state pension age. The Coalition Government has speeded them up. Last October, the Government announced that it would speed up the increase in women's pension age, so that it will reach 65 by November 2018. The state pension age will then increase to 66 for both men and women from December 2018 to April 2020. Chancellor George Osborne has talked of further increases in state pension age which could push it up to 70 before the middle of the century.

Because of campaigning by the National Pensioners' Convention, and the relatively high rate of voter turn-out by pensions, the Government has been more cautious about the state pension than the public-sector occupational schemes. From April 2011 the basic State Pension is to be be uprated by a “triple guarantee” of earnings, prices or 2.5 per cent.

The existing state system is complicated. Pension Credit, introduced by the Labour Government, is a big part of it, and has the disadvantage that it uses a complex means test and is not claimed by about one-third of the people entitled to it.

The Coalition Government has talked of simplifying the system by introducing a basic state pension at a much higher rate than now - £140 a week - though only for "new" pensioners.
However:

  • In the meantime, Pension Credit for the poorest pensioners is being frozen for four years from 2011.
  • The Government makes everything conditional on the dogma that "any options for reform must be cost neutral in each and every year". That means that if some pensioners gain from coalition measures, others must lose out.
  • £140 a week is still below the official poverty line. The National Pensioners' Convention calls for the state pension to be set above the official poverty level of £178 a week.
  • The Government's plans would probably involve the abolition of "contracting-out", whereby workers with an occupational pension scheme pay less National Insurance.

According to the Financial Times, that means that "the diminishing rump of employers who still provide [defined benefit] pensions will finally give up on them, switching employees instead to money purchase schemes".

"Money purchase" schemes mean that you pay your contributions into a pension fund without any assurance in advance of what your pension pay-out will be. It depends on how well the pension fund does with its stock-market dealings, and the calculations the financiers make at pension-age time about what "annuity" (yearly income, payable for as long or as short a time as you live) your accumulated pension-fund stash can buy.

The Government has talked of shifting public-sector pension schemes to that "defined contribution" option. In the private sector, "defined contribution" is already more usual than "defined benefit". "In Britain", reports the Financial Times, "people in such schemes have lost an average £10,000 a year of future retirement income over the past decade and will need to save a third of their salary to make up the shortfall". That is because of stock-market ups and downs, and downward shifts in the amount of "annuity" paid out per thousand pounds of pension-fund stash.

A strong turnout on 30 June, and a lively, urgent campaign of continuing action after that, designed to win rather than just to protest, will improve the chances of a decent old age, free from poverty, for all workers.

The unions should conduct their campaign in that spirit. As Karl Marx put it, they must "learn to act deliberately as organising centres of the working class in the broad interest of its complete emancipation...

"Considering themselves and acting as the champions and representatives of the whole working class, they cannot fail to enlist the [unorganised] into their ranks. They must look carefully after the interests of the worst paid trades... They must convince the world at large that their efforts, far from being narrow and selfish, aim at the emancipation of the downtrodden millions".

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