Tax the rich to pay for pensions!

By Colin Foster

Back in the 1960s, writers used to puzzle about how we would cope with “the leisure revolution”. New technologies were reducing the work-time needed to produce the necessities of life, and so we would all work less.

Since then we’ve seen huge improvements in technology — through microelectronics and otherwise — but working hours are rising.

According to an official survey: “The proportion of UK employees working long hours [over 48 a week] has increased over the last decade... The increase in long hours working is primarily due to the increased use of overtime both paid and unpaid... large rise in unpaid overtime among women... Over one third of men with children in the household worked more than 50 hours per week in 1998, which was a six per cent rise over the previous decade”.

Now the Turner report on pensions wants us to work more years as well as more hours in the week.

Already a sell-out by public sector union leaders has conceded to the Government that future public sector workers will have to work to 65 to get a full pension. Now, under Turner’s proposals, the minimum age to get the basic state pension will rise, bit by bit, from 65 to 69.

Average life expectancy for men in Glasgow is 69 years. Average life expectancy across the whole UK, for both men and women, is 76.2 years for the poorest ten per cent, and 80.3 years for the richest ten per cent, and the gap is increasing.

The Turner proposals mean that a poorer man in Glasgow will be more likely than not to die before retirement. Across the UK, poorer people will be able to expect seven years of retirement (on a small pension), and better-off people eleven years (on a bigger pension).

In fact, it is worse than that. For the majority, the Turner report is another step in a squeeze on pensions which started 25 years ago. But pensions are not being squeezed across the board. Rather, inequality is rising, and is set to rise, even faster among the retired than among people of working age. Recent studies have shown that inequality, and not just absolute poverty, leads to increased stress, poorer health and premature death.

No such worries for MPs. In 2002 MPs voted themselves an improved pensions scheme under which they can retire on a full pension of two-thirds of their final salary after 27 years at Westminster, rather than the previous 33 years. In November 2004 the government introduced a special law to safeguard judges’ pensions, by exempting their pensions savings “pots” from taxes. It did that under threat of a “strike” (in the form of mass resignations) by judges.

So a well-off minority retire in good health, sometimes with an income not far off what they received when they had greater expenses. They can enjoy themselves, travel, and help their grandchildren pay university fees or buy their first house.

A larger number retire in absolute poverty or comparative poverty and, often, in poorer health because of the harder jobs they have done or the stress of living in poverty. All they can do on their pensions is survive, and usually for not many years. They watch their grandchildren struggle in SATs-ed and Ofsted-ed schools, lacking in qualified teachers, through to jobs in McDonald’s.

One pensioner in six retires on more than £400 a week. At the other end of the scale, nearly one quarter of single pensioners are on, or below, the Pension Credit baseline.

As Karl Marx put it: “Capital is dead labour, which, vampire-like, lives only by sucking living labour, and lives the more, the more labour it sucks... Accumulate, accumulate! That is Moses and the prophets!”

No matter how much wealth new technology produces, capital always yearns for more. No matter how much the time necessary for direct production of basic goods and services can be cut, capital will always mobilise more labour to produce, advertise, and sell more gewgaws.

The “pensions crisis” is caused not by longer lifespans, but by the sharpening of the drive for profit through increased global capitalist competition in the last thirty years or so. Pensions are deferred wages; retirement is deferred time off — and capital is thirsty to reduce time off and squeeze wages.

The other factor in the “pensions crisis” is the increased role of high finance within capitalism. The steady rise of ever-larger pension funds has been a major motor in the reshaping of global capitalism over the last twenty or so years.

Larger and larger flows of cash circulate around the stock markets and the foreign exchange markets. The system becomes more and more finance-centred, more and more geared to short-term profits, dividend payouts, and share prices above all else.

Privatisation and the cutting of top tax rates are part of the same development. There are huge vested interests tied up in it, making huge profits from the commissions, fees, bonuses, and speculative gains they siphon out of the “casino economy”.

The UK’s pension fund bosses control around £1000 billion. By 1996 pension funds held 27.8% of all shares in Britain. Insurance funds (which are often pension money used to buy an annuity) held 21.9%.

Almost all new pension schemes are “defined-contribution”. Workers have to pay in just the same. Employers pay in much less. The pension workers get at the end is not guaranteed, but depends on the fortunes of the stock market. In other words, the workers bear the risk, not the bosses.

Employers often used to contribute 12–16% of salary to the old Defined Benefit schemes but usually opt for only three to six per cent for today’s Defined Contribution schemes. It is a wage cut by another name.

Meanwhile the basic state pension has been progressively run down so that today, at £82.05 per week, it is only 15% of average earnings. On present trends it will be down to 10% of average earnings by 2020.

The New Labour government’s effort to patch up the scandal, the means-tested Pension Credit, sets a floor income of £109.45 for pensions, about 20% of average earnings. Even the end-of-welfare USA has a basic state pension at 25% of average earnings. Many pensioners do not get the means-tested benefits they are entitled to.

Turner sees it as a problem that on current trends, more and more pensioners will be paupers, and more and more will depend on means-tested benefits. He proposes to patch things up by three proposals:

1. Raising the state pension age gradually to 69.

2. Re-linking the basic state pension to average earnings, so that it will rise more rapidly in future; and making part of it a universal “citizens’ pension”, paid out to everyone rather than being conditional (as the current basic state pension is) on National Insurance contributions.

3. Introducing a near-universal contributory pension scheme. Unless you opt out, you will pay five per cent of your wages into a pension fund (of your choice), and your employer will have to pay three per cent.

With these three policies, Turner argues, Britain can avoid an explosion of mass pensioner pauperism without any need to tax the rich or restrain the orgies of high finance.

Among mainstream politicians, the debate is about whether Turner is too socialistic. The “pensions industry” doesn’t like the idea of a near-universal government-administered pensions scheme which could reduce its income. Gordon Brown doesn’t like the idea of halting the relative decline of the basic state pension.

But for the working class, the answer on pensions is the same as on wages and work-hours generally: fight to break the monopoly of the wealthy few on society’s riches!