PPP = Poxy Private Pension

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How the World Bank and your boss are conspiring to wreck your retirement.

Slumbering great hulk that it is, the TUC can sustain an extraordinary level of inertia for very long periods. But when it eventually does get off its arse it can still be quite an impressive sight. The last time leaders of the TUC made any serious attempt to call a national demonstration was in 1992, when there was an upsurge of anger throughout the land over Tory plans for a second wave of pit closures. The turnout on the demo was massive and helped force Michael Heseltine to impose a (temporary) moratorium on further closures. This despite the fact that the TUC had done precious little to back the miners when it really mattered, during the 1984-85 dispute.

Likewise, the TUC's apparent ability to sleepwalk through what has probably been the most active 'modernisation' phase under New Labour - passing up of opportunities to flex its muscles over privatisation fiascos on the railways and London Underground, or in support of the firefighters - should not blind us to the fact that the forthcoming national demonstration over pensions, on 19 June, is likely to be another whopper.

Unlike the regular protests called by organisations like the National Pensioners Convention, which tend to focus on the erosion of existing pensioners' rights and benefits, the TUC's decision to make the pensions issue a central focus has more to do with the serious implications which current trends in the pensions industry entail for the entire workforce. There has been a persistent decline in the level of basic state pension for over 20 years, and the termination of the Serps top-up scheme, means that the amounts of money workers can look forward to on retirement are increasingly down to what individuals put into their own fund over the years.

Against this general backdrop there have also been a number of spectacular collapses - the first and most alarming in 1991 when it emerged that Robert Maxwell had systematically plundered the Daily Mirror pension fund. More recently we had the total vaporisation of anticipated pensions payouts at Enron, and the nosedive towards insolvency at Equitable Life. Apart from these major scandals, there has also been a recent vogue among many of the country's biggest companies to switch from existing 'final salary' (or Defined Benefit) pension schemes in favour of DC (or Defined Contribution) schemes. Generally speaking, final salary schemes are fully funded by employers and guarantee a minimum income on retirement. DC schemes, by contrast, shift the onus for payments onto the individual and produce a final pension more vulnerable to the market's vagaries. They had one at Enron, where all contributions were sunk into company stocks - before going completely belly up, just like Big Bob.

According to apologists for the pensions industry, and for the procession of blue-chip companies which have already bailed out of final salary pension commitments, the shift over to DC schemes is essential due to the annoying fact that people nowadays live longer. This - together with the equally unforeseen fact that financial markets have a habit of going down as well as up - has made the promise of final salary pensions prohibitively expensive, they weep. This would be a bit more convincing if it wasn't for the fact that pension fund surpluses were pilfered shamelessly to fuel deregulation of financial markets in the late 1980s.

Another explanation for the sudden shortfall in some pension accounts might be that between 1987 and 2001 employers are estimated to have taken 'contributions holidays' - or reductions to the amount they put into the pensions pot - to the value of £18.57 billion. This is roughly £4,000 per scheme member, and quite enough to refloat any final salary scheme which might look likely to slip into the red. Despite much alarmist talk in the press, statistics produced by the National Association of Pension Funds show that the vast majority (87 percent) of pension schemes are comfortably funded, with only a tiny minority (4 percent) in serious trouble.

If companies were serious about their incredible disappearing pensions surpluses, you might expect them to retain their own level of contributions at a high level. But, as the TUC points out, 'it is a bald fact that employers contribute much less to defined contribution schemes than to final salary schemes... in fact, they typically pay almost two thirds less'. It is this particular scam which puts pensions at the very cutting edge of the government's entire privatisation programme.

That is because, in Britain, pensions are the one aspect of an employee's terms and conditions which are not protected under the regulations which govern the transfer of employees from one employer (eg the NHS, civil service or Network Rail) to another (Balfour Beatty, Metronet or Serco). So cutting pension provisions is one of the few ways for the new private employer to make really substantial cutbacks on labour costs.

No big surprise, then, that much of the initial inspiration for this latest blessing of western-style democracy comes from the neoliberal gurus of the World Bank. Since 1994 they have relentlessly promoted 'Individual Accounts', which employees are legally obliged to set up with a private company. This plan has run into big problems, not least because of Enron, and it has already led to massive demonstrations organised by the equivalents of the TUC throughout Europe. But it has not stopped some hawks in the pensions industry from campaigning to raise the qualifying age for a state pension to 70, and for the value of the pension to be reduced to 'just enough to live on', in the words of one Financial Times editorial.

No surprise either that New Labour is totally committed to the World Bank model. But, in a number of recent high profile disputes, important victories have been won over protection of final salary provisions in the steel industry and at Rolls-Royce. In each case the threat of strike action is what has made the difference. It was this, together with the threat of further action coordinated by the TUC and the prospect of a richly-deserved tonking at the 10 June elections, which has forced the government's major climbdown over compensation for workers in collapsed pension schemes. And a series of very important battles are currently looming in the public sector over the same issue, notably at Network Rail. A massive turnout on 19 June could be just the boost needed to not only start a real fightback over pensions. It could also add enough momentum to finally bring New Labour's privatisation bandwagon to a grinding halt.


See 'Pensions in Peril' at www.tuc.org.uk.