Sunday, 5 December 2010

Pensions: An Issue To Unite Public and Private Sector Workers

A version of this article will be in the forthcoming Catalyst.

In recent years the number of people on final salary pensions in the private sector has declined dramatically. There are now only 3.6 million private sector employees in company pension schemes and many of these are in middle and upper management. The savaging of private company pensions has left millions more dependent on the meagre basic state pension in their old age. According to an OECD report published in June 2009, this is a state pension that is one of the worst in the developed world, with average income working out at just 31% of pre-retirement earnings.

To add insult to injury, the government now intends to force people to work even longer to earn this poverty level state pension. The LibCons have brought forward Labour’s plans to gradually increase the pension age, starting in 2020 when the retirement age will rise to 66. The justification for this is that we are all living longer. What the government fails to mention is that some are living longer than others. For example, a manual worker in Glasgow retiring at 66 would have 13 years (on average) of retirement left. A man in Kensington and Chelsea would have 22 years to enjoy.

Furthermore the government’s claims about people living longer fail to take into account the health inequalities that exist prior to death. Study after study has shown that manual and low paid workers begin to suffer with serious health problems far earlier than the middle classes. This means that not only do low paid workers die younger, but their quality of life in retirement due to poor health is much worse than the better off. Increasing the retirement age can only increase these health inequalities. Forcing people who are already in poor health to work longer can but lead to a further deterioration in their health and increase the likelihood that they will die even sooner.

With increasing numbers of private sector workers dependent on the state pension the government has now set about destroying pension provision in the public sector. In order to justify their attacks they have filled the newspapers with story after story of public sector workers receiving massive pensions. These stories are largely nonsense – for example, the average pension in local government is just £4,000 a year, dropping to £2,800 for women.

The value of these already paltry pensions is set to fall further under government plans to link public sector pension increases to the consumer price index (CPI). Currently pensions are linked to the retail prices index (RPI) which measures inflation much higher. The switch to the CPI will mean that the true value of pensions will be eroded by inflation. So, as the real value of public sector pensions declines, state workers, like private sector workers, will be increasingly dependent on the state pension in old age.

The defence of public sector pensions should be central to the campaign against cuts but the fight must not end there. The government hopes to divide public and private sector workers in order to weaken opposition to the cuts. This can be countered by linking the fight to defend public sector pensions to a demand for a massive increase in the state pension and opposition to the increase in the retirement age. The pension issue, then, can be a means to unite public and private sector workers.

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