pensions plan threatened
WORKERS, JULY 2004 ISSUE
The finance industry is leading an assault on government proposals to fund a rescue package of £400 million to help the 60,000 workers whose pension entitlements have been destroyed by failed company pension schemes or outright fraud.
19 June: relaxing at the rally after the march for pensions Despite the scandals of the looted pension schemes, the industry is raising every conceivable objection and obstacle to the reforms. These include ensuring any regulatory body can consult but cannot bite, and blocking "levy" proposals to protect the pensions and insurance companies from having to cover collapsed pension schemes.
The industry also wants to ensure that any pensioner bailed out by the government's rescue scheme has benefit entitlement clawed back. The financiers are fighting tooth and claw to ensure the elderly and vulnerable remain in poverty. Over 5 million pensioners are eligible for additional means-tested state benefits — effectively half of all pensioners.
The misuse of pension funds in the private sector is echoed by recent revelations about the Local Government Pension Scheme, which covers council employees. In the early 1990s ministers, alarmed by the revolt against Thatcher's poll tax, encouraged councils to keep the tax down by raiding their employees' pension schemes. Councils were allowed to do a "Maxwell" — switching money from the pension funds into council coffers until only 75% of the money needed to pay for pensions was left.
Many did exactly that. At the last valuation in 2001 councils such as Surrey, Kent and Newham had failed to grow their pension funds back to the 100% level needed to be able to pay out to pensioners. As a result, a number are now having to switch money the other way — from council tax into pensions — to meet their liabilities. Surrey still has a 25% deficit. Council fund values, invested heavily in shares in a falling stock market, have collapsed.
So what is the Labour government's response to this past daylight robbery of workers' money? Just do the same again. It has forced through new rules that give workers a choice between working five years longer before retiring or face swingeing cuts in pension. Local government minister Nick Raynsford and his boss John Prescott take the view that council workers get "gold standard" pensions and should be grateful. Yet the average pension payout to a retiring council worker is less than £4000 a year, and death benefits are twice salary, while the private sector average is four times salary.
And the reason this is happening now? So that council pension fund trustees can start to include the savings in their calculations, conveniently easing pressure on council tax in time to coincide with the next general election