Workers' Weekly On-Line
Volume 50 Number 36, September 19, 2020 ARCHIVE HOME JBCENTRE SUBSCRIBE

Pensions Are a Claim on Society, A Hallmark of Caring for the Older Generation

September 14-18 was Pension Awareness Week, with Pension Awareness Day on September 15. Pensions giant Aegon, a major sponsor, states that the campaign "aims to help the nation get to grips with their retirement savings".

Rather than posed this way as an individual matter of "saving", pensions pose themselves as a claim on the social product by the retired working class necessary for guaranteeing their right to a livelihood. Setting the context this year is an overall attack on pensions, particularly at this time of unfolding crisis precipitated by the coronavirus pandemic.

Aegon itself recently intervened in the uncertainty that has been fostered over the state pension triple lock, which is being threatened with cancellation.

The pension triple lock states that the state pension must increase each year by the whichever is the higher figure that year out of the growth in average earnings, price inflation, or a minimum level of 2.5%.

In May, it was reported that Chancellor Rishi Sunak was considering abandoning the triple lock, in the wake of launching the furlough scheme and various forms of Covid-19 support for individuals, businesses and other enterprises.

However, maintaining the triple lock was promised in the 2019 election manifesto. Prime Minister Boris Johnson recently told the Liaison Committee that the government will stick to its manifesto pledges, while Parliamentary Under Secretary for Pensions Guy Opperman talked around the question, saying that the government is "committed to ensuring that older people are able to live with the dignity and respect they deserve, and the state pension is the foundation of state support for older people".

At the same time, the ruling elite have been using their network of "think tanks" to further press for dropping or suspending the lock next year to prevent a supposedly unreasonably large rise in the state pension.

The prediction of the Office for Budget Responsibility (OBR) is that average earnings will fall this year by 7.3% due to the lockdown during the first wave of the pandemic, with a quarter of workforce placed onto furlough. The OBR then predicts that earnings will rise by 18% next year as recovery begins. On the basis of these highly uncertain predictions, the triple lock rules would then mean a rise in the state pension of 2.5% this year, followed by a rise of 18% next year.

Torsten Bell, chief executive of the Resolution Foundation, told a Treasury select committee meeting on June 9 that the triple lock "was going in its current form, at least temporarily":

"We're not going to increase the state pension by 18% next year. So the triple lock is going in its current form at least temporarily next year, unless [MPs] are considering giving very generous increases to pensioners next year. However, I expect we will not be increasing it by nearly a fifth."

Dr Gemma Tetlow, chief economist at the Institute for Government, said: "The 2.5% rule is in there for the entirely arbitrary reason that some years ago, when inflation and growth was very low, the 2.5% was thrown in to make sure the pension went up by something each year. It does not relate to the costs of living or replacing previous earnings - it is completely arbitrary."

More recently, Aegon has put the case for a "smoothing" of state pension rises over the next two years to even out "artificial distortions".

Speaking in August, the monopoly's pensions director Steven Cameron said: "The state pension triple lock has met its aim of making sure state pensioner incomes have at least kept pace with both inflation increases and earnings growth with a guaranteed underpin of 2.5% each year. But the formula was set in a very different pre-Covid-19 age when price and earnings growth tended to be relatively stable year on year. Blindly following that formula now as we move through and out of the coronavirus crisis with huge distortions to average earnings expected could create bizarre results which were never intended and which would fail any test of intergenerational fairness."

Their proposed formula is that the increase in April 2021 would be based on the current triple lock formula, while that in April 2022 would be given as the triple lock applied over the past two years, minus the 2021 increase.

On the above OBR figures, the current formula would mean a 21% state pension increase over two years. On the Aegon suggestion, that would come down to 11%. Over those same two years, average earnings will have risen by 9.4%, if the OBR predictions come true.

To bring the state pension rise down to the level of the average salary increase is what is meant by "fairness". The aim is to sow intergenerational division and block people from defending the right to a decent state pension.

The reality is that the state pension - at a current maximum level of £175.20 per week - is so low that pensioners who rely upon it for the majority of their income invariably live in poverty. For comparison, a full-time minimum wage job (over the age of 25) pays nearly twice as much at £327 per week.

Closely related to the divisive issue of "fairness" is the idea that rises under the current rules would be "very generous". Completely absent from such talk is any consideration for the impact on senior citizens during the pandemic, which has been especially brutal.

The threat to the state pension triple lock is part of the overall attack on pensions that has been going on for many years, itself part of the all-sided anti-social offensive.

Occupational schemes in the public sector and defined benefit pensions in the private sector have also been under attack, as the shift is made across the economy at large to defined contribution private pensions, which are properly speaking not pensions at all but personal savings plans. In this way, government and businesses wash their hands of responsibility and make provision for retirement an individual matter, a matter of fending for oneself.

From the narrow perspective of the competing private owners of capital, any claims, including pensions, that reduce capitalist profit are labelled costs - costs to be cut regardless of consequences or social responsibility.

Looked at without this capital-centric prejudice, various claims are made on the new value workers produce in the socialised economy: owners of capital claim profits in various forms, the government makes its claim via taxes, and active and retired workers claim wages, benefits and pensions.

Pensions are not a cost. They are claims by retired workers on new value produced by workers over their lifetime.

To be properly called pensions, their funding must be built up out of, and continue to be maintained by, a portion of workers' production of new value. This puts an onus on government and business to ensure this value contribution is made. They cannot be replaced by personal savings plans, which place no such onus, and present the right to a livelihood as if it were a matter of choice.

Pensions must be viewed as a necessary modern social programme, a just claim by workers on the value that they themselves have contributed to producing. As a social programme, pensions should be provided as of right, linked to earnings and with a national standard minimum.

Pensions are a claim on society, a hallmark of caring for the older generation. They cannot be made a private matter of fending for oneself.

Proposals and decisions are being made over the top of those who will be most affected. These decisions violate the rights of people to a decent livelihood in retirement. The triple lock was not some "entirety arbitrary" rule: it has been fought for and defended. Any change being mooted raises the crucial issue of who decides.

The need is to organise in defence of our interests and for decision-making power over the direction of the economy, so that claims on the social product in the form of wages, pensions and social programmes are guaranteed.

Note
See the two articles by Imogen Tew for the FT Adviser:
"Triple lock 'will have to go' as earnings set to jump", June 9, 2020 https://www.ftadviser.com/pensions/2020/06/09/triple-lock-will-have-to-go-as-earnings-set-to-jump
"'Smoothing triple lock' could solve state pension problem", August 24, 2020 https://www.ftadviser.com/pensions/2020/08/24/smoothing-triple-lock-could-solve-state-pension-problem


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