NOTES ON PENSION CAMPAIGN
NATIONAL PENSIONERS CONVENTION

* The introduction of the first state pension in 1908, after a decade long campaign led by the trade union movement, marked one of the most significant advances in social policy in our history. For the first time, the state recognised it had a responsibility to provide for those in old age.

* But for too long, this victory has been ignored and overlooked by many within the movement. It is vital that, just like the NHS, the state pension is seen as a cornerstone/foundation of our welfare state - and as such, something which trade unionists should defend.

* In 1997, Gordon Brown said he wanted to reverse the ratio of pension provision in Britain, from 60% state and 40% private to 40% state and 60% private. For a decade, the government's pensions' policy has been based on 2 key pillars:

(i) The widespread use of means-tested benefits on today's pensioners
(ii) The reliance on decent occupational pension schemes to take future generations of pensioners out of poverty

But this policy is clearly unravelling:

(i) Means-tested benefits remain unpopular amongst many older people, and 1.8m still don't claim them, despite being entitled to do so
(ii) Final salary pension schemes are closing to new entrants and are being replaced by less generous and more insecure defined contribution schemes
(iii) 62% of pensioner couples have an annual income of £10,000 or less - 50% of single pensioners get by on £6000 or less. The majority of the poorest pensioners are women
(iv) These pensioners have a very limited income from occupational pensions - often less than £2000 a year

And the situation is worsening:

* The government's response to this pensions' crisis was to set up the Turner Commission, which took three years to report. Whilst it acknowledged that Britain had one the most complicated and least generous state pensions in Europe, it drew the wrong conclusions.

* The government adopted the vast majority of Turner's recommendations, which were put into the Pensions Act 2007:

(i) To restore the link between the state pension and average earnings in 2012 (if affordable)
(ii) To reduce the number of years needed to pay National Insurance to qualify for a full state pension, for men and women, to 30
(iii) To increase the state pension retirement age for anyone under 48
(iv) To introduce a private savings scheme for the low paid who are without any form of company pension

On each of these areas, the government's policy is alarming:

* By 2012, 3m of today's pensioners will have died, and because the value of the state pension will have fallen in the intervening years, the extra that the link will give in 2012 is just £1.40 a week more than pensioners would have got anyway under the existing system. Quite simply, 10% of nothing is still nothing! Even after the government's reforms, a third of all pensioners will still be reliant on means-tested benefits in 2050.

* Whilst the reduction in the number of National Insurance qualifying years is welcome, the government refuse to apply it retrospectively to existing pensioners - despite around 87% of all older women failing to receive a full state pension because of time spent out of the workplace raising a family, caring for dependents, taking low-paid or part-time employment.

* Increasing the state pension retirement age to 68 will have the biggest impact on the low paid and manual workers, who cannot afford to stop work. In effect, we are stripping away the right to a decent period of retirement for working people, and there has been very little fight back.

* Around 9-12m workers don't have any other pension provision than that provided by the state. The government's aim is to get these people to pay 4% of salary, employers 3% and tax relief of 1% into a private savings scheme. Experts say that you need a pension pot of about £100,000 to provide a pension in retirement of about £6000 a year. But the government's scheme will provide less than half that amount.

* Furthermore, there are a number of other failings to the proposal:

(i) Many low paid workers will opt out of the scheme because they will be unable to find any extra money to put away
(ii) Some employers will encourage workers to opt out so that they don't have to put in the 3%
(iii) Some employers who are currently paying more than 3% into their company pension schemes may decide to reduce their contributions to that level
(iv) The government cannot guarantee that after a lifetime of contributing to the scheme, the individual will have enough to prevent them from still needing means-tested support when they retire. If this cannot be done, many workers will wonder whether it is worth bothering with the scheme at all

* In Europe, the trade union movement has a role in negotiating the level of the state pension. Here, the trade unions negotiate individually on their company pensions. And there is a weakness is having one scheme pitched against another - and all schemes relying on the performance of the stock market.

So where does that leave the campaign?

* Inevitably, the focus for millions of working people is going to return to the role that the state can play - just like 100 years ago. We should consider how we could have an improved and strengthened state pension system:

(i) The National Insurance fund currently has surplus of £46bn - which is forecast to rise to £114bn in five years. This money is being taken out of the fund by the government and invested into government stocks and gilts. The government is therefore effectively lending money to itself - and the money from the stocks is then being used for other public expenditure. This means that rather than put up income taxes, the government is using the NI fund as just another form of taxation - rather than using the money for its original purpose of paying pensions. This has got to stop
(ii) Those earning more than the upper earnings limit of around £40,000, only pay 1% of national insurance on all income over that level. Abolishing this rule would mean that higher earnings would have to pay 11% on all their earnings, and not just the first £40,000.
(iii) Higher rate tax payers also receive a higher rate of tax relief on their contributions to personal and occupational pensions. So the better off are given even more assistance to build up a bigger pension pot, than the lower paid. As a first step, reducing this tax relief from 40% to the standard 20% rate would be more equitable, before moving towards abolishing tax relief altogether - which could raise an additional £20bn

* This issue is not going to disappear. On the contrary, it looks set to get worse and trade unionists need to start raising these serious issues inside their unions. If we strengthened the state pension system, not only would we ensure real financial security for everyone in retirement, but we would also begin to end the power of the private equity companies who use the huge amounts of money in pension funds to buy and sell businesses and make workers redundant.

* One way to start backing the state pension is to support the national lobby of Parliament on 22 October 2008, which is backed by the NPC and over 15 trade unions. The campaign is demanding:

The state pension be set above the official poverty level of £151 a week, paid to all men and women, and linked to earnings now

This is a struggle not just for today's pensioners, but for all generations. After 100 years of the state pension it's about time we ended pensioner poverty for good.

Neil Duncan-Jordan, National Organiser, National Pensioners' Convention