The Great Pension Robbery

November 29, 2011 at 7:20 PM Leave a comment

Wednesday 30th November 2011 will see the largest set of co-ordinated industrial action by trade unions in a generation over the Government’s proposals to change public sector pension schemes on the basis that the public purse can no longer afford them.

In the past pensions have not been burning issues for members of black communities who have been struggling against racism. This has partly been because the number of black workers in the UK black community at pensionable age has been relatively small and for younger workers the need to plan financial security in their old age is not at the forefront of their minds. However a recent report by the Runnymede Trust demonstrated that this is rapidly changing and forecasted an increase in the number of Black people over 65 (in England and Wales) from 230,000 in 2001 to 2.7 million by 2051.

More recently however debates at the TUC Black Workers’ Conference and increased involvement of black workers in the recent industrial action show that this is becoming an important issue. This interest is not just because a larger proportion of the black population are getting older, but also because in the public sector where significant numbers of Black workers have gained employment the public sector pension schemes paid into over the length of their working lives are now under attack.

The current attack on pensions is nothing new. Back in the 1980s Margaret Thatcher’s Government, keen to help their friends in the city develop a financial services industry, went on a charm offensive to persuade public sector workers to move their pensions from secure final salary schemes to personal pension plans. What they didn’t say was that a personal pension plan costs lot more because of administration cost and that the value of your final pension would be dictated by how well the stock market was doing at the point of retirement. They also failed to warn those that left pension schemes that the sales patter fed them by banks and insurance agents that they would get a better pension on retirement was lies. Unsurprisingly by the end of the 1990s it was discovered that thousands of public sector employees had been mis-sold personal pension plans. Many firms that were involved in this scam went out of business to avoid having to pay compensation to the victims and it was left to the taxpayer in the form of the Financial Services Compensation Scheme to pick up the tab.

Attacks on private sector defined benefit (final salary or career average) schemes came in the 1990s when employers decided that they would prefer not just to take pension holidays by not paying the employer’s contribution into company pension schemes, but not have schemes at all and force workers, at least those that could afford it, to rely on personal pension plans bought from financial services companies, unless of course you were a top executive. This little trick was accomplished by asking financial actuaries in the city to change the way that they calculated the long term values of pension funds investments. The calculation was changed to calculate the risk of the funds over a much shorter period and based on investment values just after there had been stock market crash.

Not surprisingly the result was that what had been once financially viable pension funds were found to have large pension gaps as the assets in the schemes were drastically downgraded and liabilities increased. This of course provided employers with the excuse to either close pension final salary pension schemes to new employers or close them down completely thus devastating pension provision for ordinary workers in the private sector.

With pension provision in the private sector devastated the current Government has turned its attention to the public sector where workers are accused of having the benefit of gold plated pension schemes. This is despite the fact that roughly half of public service pensioners receive less than £5,600 a year. Recent changes to the public sector pension schemes since the coalition Government came into power mean that those in public services are already paying a 3% increase in their contributions and seeing the value of their pensions drop because index rating of pensions has been moved from the retail price index to the consumer price index, which will mean smaller annual pension rises.

This means that members in public services are already paying more for less, but the Government is not stopping there. Future proposals for changes to the schemes include:

• Increased contributions – by 50% or more

• Raised Retirement Age – to 66 for those over 42, 67 for those between 34 and  42 and to 68 for those under 34

• Replacement of final salary schemes with career average – less money for our • retirement.

These changes are likely to make being in the pension scheme, if you work for public services, prohibitively expensive and result in many current workers opting out of their current pension schemes and future workers not joining the schemes.

Public sector unions are quite rightly vigorously campaigning against this outrageous robbery. Pensions are deferred payment for old age in terms of the workers’ contribution and the employer’s contribution. The fact that the Government believes like their friends in the private sector that they are entitled to renege on schemes that workers rely on for their retirement is outrageous.

For the Black community the context for the current attacks on public sector pensions is one in which many Black people endure pensioner poverty and where the number of older Black people is growing rapidly. Runnymede’s recent report, Ready for Retirement?, shows that people from all Black backgrounds are more likely to experience pensioner poverty than the wider population. Statistics from the Department for Work and Pensions (DWP) show that half of older Pakistani and Bangladeshi people live in poverty, as do almost a third of Indians and African Caribbeans, in comparison to one in six older people overall. Black people are also more likely to experience poverty before retirement. For example, 65 per cent of Bangladeshi people live in poverty, compared to 20 per cent of white people (DWP figures). There is, therefore, huge risk that many in the growing population of older Black people will have insufficient income to maintain a decent standard of living.

Many young black workers who work in the service industries such as finance, media, IT or the arts and don’t understand the importance of pensions do not have access to a decent occupational pension scheme. Many others who work for agencies, in call centres or doing temporary work are not covered by occupational pension schemes. For women, not having access to an occupational pension scheme to supplement their state pension is disastrous. They already suffer because of career breaks to raise children and make up an overwhelming proportion of those that work part time. Recent research revealed that women lose out both ways as they often fail to pay enough contributions to receive a full state old age pension. As a result 16% of newly retired women have a full basic state pension as against 78% men. Luckily many black workers are relatively young compared to the population as a whole with 32.39 per cent in the 22–44 age group and 15.18 per cent in the 45–64 age group. This means that the spectre of mass pensioner poverty in black communities is some way off. However in 20 – 30 years there will be a tenfold increase in numbers of pensioners in the black communities and if we do not wake up to the realities of old age then our communities will be heading for a disaster. Those that believe that culturally we will be alright because younger relatives will look after us, or that they will go back home where it’s cheaper to live are deluding themselves. If we are to avoid the scenario of black pensioners dying because they haven’t got enough money to keep their houses warm or eat decent meals then action is needed now.

It is not an issue that can be left to others outside our community to campaign on. If we want to rectify the historic disadvantage that is faced by black pensioners, have access to decent occupational pensions and ensure that there is an adequate basic pension provision for our retirement then we have wake up to this issue now. We need to educate communities about pension issues, get involved in the union campaigns and industrial action to defend public sector pensions and fight to secure occupational pensions for all. This is not a choice, we can’t afford not to.


Entry filed under: Politics.

The Anti Rascist festival – Now and Then What Price Justice?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed



%d bloggers like this: