news analysis - what 'pension reform' really means
WORKERS, JULY 2005 ISSUE
In the recent Queen's Speech are plans to screw even more money out of workers in the form of so-called pension reform. Previous issues of Workers have outlined the deliberate destruction of pension schemes, with employers taking 'pension holidays', boosting their profits by taking surpluses from our pension funds, and government raiding public sector pensions to keep costs within EU parameters.
Adair Turner, former CBI chief and government supremo, is carrying out a review of pensions. He says there is a "muddle" over pensions, when in fact government is clear about wanting to raise the retirement age and force workers into more private pension schemes; no, the muddle is in our minds as to what is rightfully ours and what to do about it.
EU control
Britain, unlike euro countries, has about £750 billion in occupational pension scheme assets — 75% of the EU's pension assets. These assets built up by past and present generations of workers have been put aside to pay present and future pensions — 81% of Britain's GDP. Pension provision in Germany is 16.3% of GDP, in France 6.6%, Italy 2.6% and Belgium 5.9%. At a time when our country desperately needs investment Britain's pension funds hold record levels of overseas stocks and shares — 28% of assets for average funds, up to 50% for others. The EU wants its hands on the rest by further liberalising national investment rules for pension funds and enabling multinationals to provide unified pension plans for their workers, reducing costs by millions each year.
Planning a crisis
The cost of occupational pensions has increased by some 40% over the past eight years. This is almost entirely due to the fall in interest rates that has taken place and has very little to do with workers living longer after retirement, as Adair Turner would have us believe. The reason falling interest rates have had such an impact is that with current returns the capital now required to provide each £1000 per annum of pension has increased from around £10,000 to around £18,000. Yet even the increased cost of occupational pensions could have been absorbed had it not been for the government and employers stealing from our funds through the introduction of pension fund investment taxes in 1997 and pension contribution holidays over the past 20 years.
Also, in 1995, as preparation for EU convergence and the Maastricht Treaty to prepare for the euro, the Treasury stopped the issue of Government Gilts through the UK financial gilt market. Government said it was reducing national debt — whereas in fact it could no longer finance its revenues through the issue of new gilts because it would contravene the EU laws on borrowing. With the end of new gilts the financial demand for gilts increased, especially 15 and 20 year gilts which would underpin pensions paid to retiring workers expecting to live a further 15—20 years. Remaining gilts have rocketed in price, thus also contributing to the increasing cost of pension final salary guarantees. This is another high price to pay in the drive towards European integration.
All workers should stiffen the trade union campaign, ignore distractions about living longer and instead focus on the real culprits — the government and employers, both sponsored by the EU. What is rightfully ours has been stolen from us. We must take it back and rebuild Britain.