By Mike Fenwick, UNISON
Trade union leaders in the TUC have welcomed the Government’s White Paper on pensions, published on 25 May.
Only the week before, the TUC had set out its “bottom-line” five tests for the White Paper. Even on a generous reading, the White Paper passed only one of the five tests.
TUC General Secretary Brendan Barber said: “We welcome this progressive White Paper. Ministers can be proud of a document that looks like it can be the foundation of a new pensions settlement.” Tony Woodley of the TGWU called for “two rousing cheers” for the government.
Instead, unions should be fighting to defend workers’ existing pension rights, to demand improvements, and to insist that the bosses and the rich pay.
After the Turner Commission report last November, many hoped for a decent national citizens’ pension linked to earnings. The White Paper offers none of these guarantees.
The state pension age for men and women is to rise to 66 by 2030, to 67 by 2040 and to 68 by 2050. Private savings and contributions will play a bigger role. Final details, particularly for a secondary state pension that would provide a top-up to the basic pension, dependent on earnings but capped, have not been decided.
A National Pension Saving Scheme will ask all those not in occupational schemes to pay in four per cent of their wages. But current inequalities in tax relief on pension savings will continue. High earners can claim back 40% of what they put into their pension pot, but basic-rate taxpayers will get only 22p for every pound.
The TUC’s first test was supposed to be restoration of the linkage between the basic state pension and average earnings. Tory prime minister Thatcher abolished that link in 1980, and since then the value of the basic state pension, relative to average earnings, has fallen steadily. If the link remained, the state pension now would be £119 a week rather than £82.05.
That would be enough to help many of the two million pensioners who live below the poverty line. But the White Paper offers restoration of the link only as from 2012 — with wiggle room to 2015 if needed, and even then only on the basis of “affordability”.
The TUC should be fighting for immediate restoration of the link, with the costs offset by taking back the tax cuts given to the rich by the Thatcher government that broke the link.
The second test: a better deal for women. The White Paper proposes that you will need only 30 years’ contributions record to get the full basic state pension, and with some special arrangements for those who stay at home as carers. This should allow some 70% of women by 2010 to receive the full state pension.
But occupational pensions in the public sector — where most women work, in often low-paid jobs — are likely to lose current benefits and rights. What is given away with one hand is taken back with the other. Even the Tories have complained that not enough has been done for women.
The TUC’s third test was that the cost of pensions be more evenly shared. But the projected increases in retirement age are universal, with no account taken of the differences in life expectancy between different groups. An extra year before you can claim your pension may not make much difference if you can expect to live another 15 years after age 65, but if you are poor and likely to die at 66, it’s everything.
And the rich, always more likely to be able to afford to do so, have been given extra incentives to save. The White Paper maintains all the current inequalities of the present system.
Test no.4: that employers should have to contribute to pensions. After 2012 all workers not in a company scheme will be enrolled in a new National Pension Savings Scheme. Employees will contribute four per cent of earnings, the employer three per cent, and an additional one per cent will come from the government. The CBI is complaining that this is unaffordable, and will be paid for by lower wages. But the proposal just confirms the longer-term retreat of employers from occupational schemes.
In the past employer contributions to pension schemes were in the order of 12 to 15%. New Labour has let big business get away with abandoning this basic commitment to workers with a cut rate alternative, and even then they want you to pay for through a smaller wage packet.
The money saved by cutting employers’ contributions to pension schemes has gone into the profits, share options and generous pension deals that keep the bosses fat and the division between rich and poor growing so fast.
The TUC’s final test was that the scheme would be simple, secure and low cost. The National Pensions Saving Scheme may well be managed by the private sector, where the motive is profit, not security of income, and the vast sums involved will remain outside any form of democratic control or oversight as the Turner Commission recommended. New Labour’s glorification of the market and hatred of the public sector makes it unconcerned about to providing a secure, publicly-provided framework for the future of pensions.
The White Paper does widen the scope of the Financial Assistance Scheme set up to help those workers who lost pensions when their firms went bust. The scheme will now help an estimated extra 30,000 workers, extending it beyond those within three years of retirement previously covered. But the very need for such a scheme would vanish if New Labour were prepared to adopt more radical approaches that held employers legally accountable for contributing to and paying out pensions.
To put all this in perspective, even with the extra savings and longer time at work, pensions in Britain will still only cost some 7.5% of GDP in 2050, as compared to the European average of 10.6% now. We will still have one of the lowest state pensions in the West, and means-testing for a likely third of all pensioners.
Apart from a compulsion for employers to contribute — only 25% of what historically they would have contributed – none of the TUC’s tests have been met. Yet the TUC welcomes the White Paper!
In France, Germany, and Italy, pension reforms that would have done half of what New Labour is getting a way with were resisted by national industrial action led by the national unions. A line should have been drawn over the increase in the age of retirement and the prospect of making workers pay more.
The TUC had a radical alternative to fight for in the idea of a capital levy that would not have let big business off the hook for paying for pensions.
Trade unionists have seen pensions as deferred wages, a guarantee of income after retirement taken from the labour you contribute during your working life. In the past twenty years as occupational schemes have been closed or collapsed, those future wages have been taken away. It amounts to a massive wage cut for most workers.
If a boss came and told you that from next week you would get 10% less in your pay packet, despite increased productivity and an increased working week, you would object and call on your union to act. That is exactly what has happened by stealth over the last twenty years — but the unions have not fought.
Now that the precedent has been set by the private business, the same moves are being tried in the public sector by New Labour.
Already it is being said the “framework” agreements offering limited guarantees for current employees in Health, the Civil Service, teaching, etc. will have to be reviewed in light of the White Paper.
It’s not too late to act to defend those pension schemes that still exist and on the back of that go on to demand real pension reform that looks at the problems of the future from the point of view of the workers who are being expected to pay, not the bosses who are looking to save money for themselves and their shareholders.
• No to any increase in the State Pension age.
• For a decent state pension linked to earnings now.
• Make the bosses pay through an increase in income tax for the rich and a levy on profit for business.
• For the unions to fight for their members’ interests, not the bosses and the rich.