Article from the Feb. 2005 issue of the Socialist
newspaper of the Socialist Party, Irish section of the CWI

New Labour

Robbing our Pensions

by Ciaran Mulholland, AMICUS Rep, Homefirst Community Trust

THE PENSION rights of the majority of the workforce in Northern Ireland are under attack. Private sector companies have been closing what are known as "final salary pension schemes" (two million private sector employees have lost their right to final salary based pensions in the last ten years) and now the New Labour government are proposing to do the same in the public sector.

Under final salary schemes, pensions are based on the final salary a worker earns, usually the highest they earn in their lifetime. Such schemes are being replaced by pensions based on average lifetime earnings and are worth much less.

The retirement age in the public sector is also to be raised and employment contributions are to be increased. The present situation is that public sector pensions are funded 72% by the employer, 28% by the employee. The government Green Paper proposes that the employer will pay 60%, the employee 40%. In this way the government hopes to save at least 100 billion over the next few years.

Presently most public sector staff pay 6% of their salary to their pension fund. Under the new proposals the worst paid (7,000 a year or lower) will pay 7%, whilst better paid workers will pay up to 10%. If the government were to propose a pay cut of 1% for those already living in poverty, there would be a storm of protest This proposal is precisely such a pay cut.

Currently the pensions of many workers are based not just on basic pay but also on extra payments such as shift payments and payments for weekend working. Many low paid workers, such as residential workers, parks staff and caretakers, rely on these payments to boost their low basic wage. Under the new schemes such payments will be excluded from pension calculations leading to a pension cut of up to one third for some.

Today an employee can retire at 60 without their employer's permission and on a full pension if he/she has worked for 40 years. In the future a worker will still be able to retire at 60 but will lose a third of their pension if they do so. Clearly most workers will have to struggle on until they are 65 as they will not be able to afford to retire earlier.

Early retirement arrangements are also to change for the worst- now it is possible to go at age 50 if the employer agrees, in the future the age limit will be 55.

The private sector has saved itself over 20 billion since 1987 by taking "contributions holidays", that is not paying into a pension scheme for a time because the schemes were supposedly in such a healthy state. In this way private companies boosted profits by over 4 billion (according to TUC research).

The government and private companies argue that the money to pay for pensions is simply not there. This is not the case. Pensions are essentially earned but deferred wages. Workers pay for their pension-it is not a gift.

Since the mid-1970s the boundaries of the welfare state have been gradually pushed back. The assault on pensions is part of this process. Also since the mid-1970s the rich have got richer, partly as a result of a huge tax giveaway. Part of this tax giveaway is tax relief for private pensions, that is, subsidies for private pensions. Half of these subsidies go to the richest 10% in society.

Pensions in Northern Ireland and Britain are already low by international standards. The average pension for a council worker is only 3,800 a year.

On average workers receive only 37% of their pre-retirement earnings when they collect their pension. The comparable figure in France is 71%, in Sweden 76% and in the Netherlands 70%. The average spend on pensions in the European Union is 10% of GDP, compared to 5% in Britain.

On 18 February there is a union day of action on pensions. This alone will not shift the government but will send a warning shot across their bows. Industrial action is necessary if hard won pension rights are to be defended. UNISON is balloting its members in local government in Britain for a one day strike on the issue, probably on Wednesday 23 March. Other unions including the TGWU, NIPSA, UCATT, GMB, FBU, AMICUS, PCS may also go to ballot.

A one day strike involving all the public sector unions would be of immense importance. It would be the biggest such action for decades and would pit millions of public sector workers against the New Labour government in the run up to the general election. For this reason the tops of the big unions are likely to attempt to cut across a one day stoppage if they can. Only pressure from below will ensure the militant action necessary to save our pensions.

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