This autumn, the Pension Commission will make its recommendations. It was set up to find an extra £50b a year to keep up the current living standard for pensioners.
Between now and then, the trickle of news stories about the pensions crisis will become a torrent, with the line that we are not saving enough for our extended old age. Constant repetition of this will prepare us for the bad news that is sure to come out of the report.
The commission's head, former CBI chief Adair Turner, said: "The ultimate solution to the problem was bound to involve a mix of later retirement, higher taxes and increased personal savings". He predicts that those on average earnings are likely to be hit hardest. Any mention of the rich is carefully avoided.
Crisis? What Crisis?
We have to get one thing straight from the start. The pronouncements of politicians and bosses are just a cover to disguise an attack on working-class people.
It is the latest in a quarter-century of attacks. It began with Thatcher's 1980 cut of the link between pensions and wages, the result being that the state pension is now worth 15% of average earnings (it used to be 20%). The latest attacks are the rise in women's retirement age from 65 by 2020, and the plan to raise the normal pension age for public sector workers from 60 to 65.
Ministers and the media say that the crisis is because we are living longer. But, as we explain here, government and employers have had a big role in preparing this crisis.
Government Backs Out
The government’s main concern is to get out of pension provision. In 1998, New Labour published a Green Paper, 'A New Contract for Welfare: Partnership in Pensions'. It aimed to cut public spending on pensions by substituting private provision, which it believed could supply 60% of needed pensioner incomes by 2050.
The huge extension of private pensions is risky. MPs know this, so they have not put their own pensions out to the private sector! Instead, they have given themselves bigger pensions from the public purse. Judges too - they threatened to strike if their pensions weren't protected. But there is one rule for those in power, another for the rest of us.
As most of the private provision rested on stock market performance, the slump in 2000/03 caused a policy re-think, hence the Pension Commission, set up in 2002.
But the government won't re-think state pensions. Gordon Brown told the CBI, "I will resist demands ... such as linking pensions to earnings where this would put at risk the fiscal position …" He won’t upset investors by providing decent pensions from taxation.
To keep its middle-class vote, New Labour will also not consider changes to the £19b it loses due to tax relief on pension savings. This is very regressive. Firstly, you can only claim it if you pay into a pension (9m of us don't, mostly low-paid wokers). Secondly, higher-rate tax payers get a higher rate of relief. 55% of this tax relief (about £10b) is received by just 2.5m high-rate tax-payers.
Employers Take a Break
Employers have made things worse, with a headlong rush to get out of final-salary schemes (where the employer carries the stock market risk) into money-purchase schemes (where the worker carries the risk).
This is highlighted by Network Rail's attempt to close its final-salary scheme to new entrants. RMT managed to half block this with a deal to secure access to it, but only after a five-year qualifying period.
Then there was the pension holiday scandal. Between 1988 and 2001 - when a buoyant stock market made it seem that the value of pension funds could cover future pension payments with lots to spare - the employers took 'pension holidays' totalling £18.5b. In the same period, just £1.13b was used to reduce employees' contributions.
In some schemes eg. Central Trains, staff had to give permission to do this. Workers' representatives made a big mistake and agreed. The stock market fell, fund surplus became deficit, and the company upped our pension contributions to make up for a shortfall created by their own greed.
There are other ways to solve this 'crisis' - by making the rich and the employers pay, rather than the workers.
Socialist and pensions expert Robin Blackburn argues for a new compulsory share levy, calculated as a percentage of annual profits. The shares would be held by new publicly-controlled Pension Reserve Funds, which would use their dividend income to fund fair pension coverage for all.
Company bosses would try to hide their profits. So we would need to make them 'open the books' for workers' representatives to inspect. This would be a radical demand that would mean a big shift in how industry is run. Demands like this point the way forward from the limited demands we fight for today towards a real change in society. Marxists call them transitional demands.
Living Too Long?
We now live longer than we did fifty years ago. This should be a cause of celebration, not an excuse to attack our right to security and dignity in retirement.
Although there are now more pensioners, the workforce is also more productive and society more developed. There is enough wealth to provide for everyone.
The problem is not that we are living too long, but that the rich are hoarding the wealth. The rich have always lived longer than the poor, so maybe it is them that we can not afford!
Whatever way we fund pensions, the bosses will always try to undermine it. The working class needs to wage a constant struggle to make the capitalists pay for their own crisis, rather than making us pay. And ultimately, to create a socialist society where wealth is used to give everyone a decent living standard, and production is organised for need not profit.