Britains two tier pensions system
According to the TUC, eight out of ten of the UK's top companies provide directors with pensions that can pay out in full at 60 and are worth, on average, 26 times those of most employees. Moreover, directors' final salary pensions are most likely to build up twice as fast as the most common rate for employees in final salary schemes
Gordon Brown has shown his New Labour credentials by questioning
the deal agreed by the Government to allow public-sector workers to
continue to retire at 60. While Downing Street and the Department of
Work and Pensions insisted that the deal with the unions would not be
unpicked, the unions, who called off a strike when the deal was
struck, sensibly renewed their threat of industrial action.
Brown raised the pro-business standard addressing a CBI conference
in London. He was worried that the recent public sector pensions deal
will prove too expensive in the long run. Shame he had no such qualms
about invading Iraq or about finding a replacement for Trident.
Clearly he is showing the markets that New Labour's Thatcherite
policies will be save in his hands. As such, he needs to address the
needs of business. State pensions cost them money in taxes, while
company pensions become a permanent and ever lengthening drag on
profits. Something has to be done.
What is particularly galling about the pensions issue is the
hypocrisy. It was staggering to see a CBI spokesman twittering on
about "unfairness" on the news or hear the director of the British
Chambers of Commerce arguing that "what we are going to end up
with here is two nations. That will create real resentment in the
workforce." Employers warn of a "two-tier" pension system and
John Sutherland, the CBI president, opined that the government
"must treat all equally and fairly. It cannot expect private
sector employees to work until sixty-seven to finance the pensions
and early retirement of public sector employees who retire on
inflation-proofed final salary pensions at sixty. Society can no
longer afford such schemes ...and such inequality is
Unsurprisingly, the CBI made no comments about the existing
"two-tier" pensions system, that between bosses and workers.
According to the TUC, eight out of ten of the UK's top companies
provide directors with pensions that can pay out in full at 60 and
are worth, on average, 26 times those of most employees. Moreover,
directors' final salary pensions are most likely to build up twice as
fast as the most common rate for employees in final salary schemes.
The directors of the UK's 100 most important companies have amassed
pensions worth a total of £.9 billion which, on average, would
pay out £167,000 a year if claimed now. This is over 26 times
the national average of £129 a week and over 30 times the
average public sector pension.
Of course the CBI is not arguing that private sector workers
should receive the same deal as bosses. Nor even the same one as
public sector workers. No, rather than level up, all workers are to
have their pension deals levelled down and they are using the issue
to divide workers against each other. The last thing that the private
sector wants is its wage slaves wanting a better deal and so they
want them to help bring down their more fortunate fellow workers down
to the level the bosses think is best. Given this, the imposition of
a later retirement age in the public sector would strengthen the
private sector's hand as it attempts to enforce the same on its
workers. As it is, the deal is hardly brilliant as the government has
succeeded in getting the consent of major public sector unions for a
higher retirement age on future public sector workers.
Thus the bosses' real worry about the "two-tier" system -- if
public sector jobs have better pensions then private industry will
have to provide the same. It is, in other words, simply a variation
of the old argument that unions "exploit" non-unionised workers. In
reality, unions provide a minimum level of wages and conditions which
bosses have to match in order avoid uppity wage slaves demanding a
better deal. As such, the bosses' hypocrisy about a "two-tier" system
could be used to challenge their plans and get a better deal for all
The CBI's new concern from equality and affordability is pretty
narrow. Apparently, it thinks that this society can afford the
millions paid to the bosses. In 2001, it was announced that UK bosses
were the best paid in Europe, earning an average of £509,019 a
year. These outstrip those of every other European country by more
than £100,000 and had risen by almost one-third since 1999.
Meanwhile, the UK's manufacturing employees have become the lowest
paid in the developed world.
In February, 2003, it was reported that two-thirds of the
workforce were now earning less than the average wage, up from 60%
ten years previously. The rising wage inequality was as a result of
huge pay deals for executives and directors. Top pay has been
increasing faster than for the rest of the workforce. Ironically, the
strongest rise occurred since 1997. In 2002, for example, executive
pay rose by 17% -- a year when billions was wiped off the value of
companies so destroying any claim that this pay are related to their
contribution to society.
The CBI president did not rally against other forms of inequality,
at the unfairness inherit in 23% of UK wealth being owned by 1 per
cent of the population or that the wealthiest 10% own more than half
the wealth. That the poorest 50% own 6% of wealth or that the wealthy
have got wealthier over the last ten years failed to raise a moment
from our advocates of pension fairness. Nor did he attack a
"two-tier" system in which the few own most of the wealth and the
rest of us are expected to put up with the crumbs which come our way.
Nor did he ponder why "society" cannot afford to pay for pensions but
has enough to invade Iraq, impose ID cards or replace Trident.
Finally, it does seem strange that the CBI, representing as it
does the private sector, should lecture the public sector on this
issue. After all, private pension schemes proved to be completely
disastrous ("mis-selling" being the euphemism of choice rather than
the more accurate fraud). Nor should we forget that it was the old
pro-business party (the Tories) who advocated these schemes after
breaking the link between state pensions with average earnings in
favour of the Retail Price Index. Even the way the CBI is framing the
issue backfires on them. For how incompetent are UK bosses anyway?
They have one of the most pro-business regimes in the world and still
they worry about their profits. No matter how slight the proposed
reforms, the CBI are guaranteed to moan about how industry cannot
afford it. So much for the wealth that an unbridled capitalist
economy would produce!
In summary, the so-called pensions 'crisis' is really a battle. It
is between the priorities of capital and those of human need. It is a
case of what we need to live and not whether the system can afford
it. If enough pressure is generated from below, then what can be
afforded will change accordingly -- as will what people want and the
kind of society they wish to live in.
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