Hole at the Heart of the System

Issue section: 

Following John P Johnston's excellent letter (July/August SR), at 82 and a longstanding member of the campaigning pensioners brigade (which I hope he will join), I think his description of the World Bank's model for a pension system is correct, omitting only to say where it came from - Britain.

It is an almost exact copy of the Beveridge pension model, whose plan was for a state pension 'sufficient... to provide the minimum income needed for subsistence... and furthers the condition within social security for the growth of a multi-million pound enterprise of private pensions'. This concept is the curse of our pension system but beloved by employers.

Barbara Castle attempted to improve this system (1975), basing it on social (national) insurance contributions from workers and employers, with part flat rate, part earnings-related benefits, both indexed to wages. Unfortunately she buckled under pressure and left a huge hole in the system, allowing 'opting out and going private' for the earnings-related segment, which is what fuels privatised pensions. These conclusively bit the dust when the stockmarket bubble burst in 2000.

Employers, the City and the TUC crept through this gaping hole, incidentally penning the way for Thatcher to abolish the indexation of state pensions to wages within a few years. This cut to workers' incomes in retirement received almost no attention at the time (1980).

The private and occupational pension niches which groups of workers negotiated piecemeal, guided by the TUC, are now mostly dead ends. They have virtually no legal protection. The TUC does not seem to have woken up to this even now. Of course if selected workers have the bottle and can ground the planes or stop the trains, they can get concessions from employers over pensions, among other things - but for how long and who else does it help? And what about the workers (including a large majority of women) who don't have an occupational pension that will make their retirement income up to the means-tested Minimum Income Guarantee, or even have one at all?

In western Europe, where the strategy of the trade unions has been to refuse to touch private pensions with a bargepole, things are different - dramatically so.

The general level of pensions as a proportion of wages is around twice what it is in Britain, and employers contribute twice the amount or more in pension contributions compared to Britain.

When their pensions are under attack the trade union response is to organise general strikes and demonstrations of millions, because an attack on one is very clearly an attack on all. Compare this with the small pension demonstration of about 8,000 in London on 19 June.

But they add up to a big no to privatisation, in pensions as much as in other public services. It is not only possible to eliminate privatisation from our pension system, but absolutely necessary if most British retired workers, especially women, are ever to have decent pensions.

Hugh Lowe