There is no pensions crisis in Britain – other than the consequences of the last 30-year or more attack on workers and our industries made by successive governments…
According to the government we are living too long, so we’ll have to give up our pensions. Its propaganda on longevity is becoming more shrill as workers begin to wake up to this particular pensions scam. Workers has consistently shown that the effects of longevity projections are being exaggerated and that men living on average to age 84 and women living on average to 87 is not the funding difficulty that it is made out to be.
This so-called pensions problem, like all other issues over funding, is actually about the collapse in industrial wealth creation that has occurred in Britain over the past 30 years. The Tory, Labour and Coalition policy of exporting our factories, while importing credit so as to try to camouflage falling living standards, has failed in its political objective of destroying the organised working class. In now recognising this position the government and its apologists are becoming more bizarre in their future projections.
For example, many of us would have heard the news item at the beginning of the New Year about government figures claiming that 10 million Britons alive today will live to be more than 100 years old. This choreographed news item was accompanied by comments from the pensions minister claiming that this is one of the reasons why the government is rolling out its National Employment Savings Trust (NEST) initiative. NEST will begin to make it compulsory from 2012 for all employers to contribute all of 1 per cent of each worker’s earnings between £7,500 and £33,000 annually into an authorised pension scheme.
Just cutting costs
When one considers that a current final salary pension scheme has an average long-term employer annual contribution of between 15 to 18 per cent of total payroll (not only on a limited range of earnings), the government’s aim of closing final salary pensions and introducing NEST can be understood immediately – namely to reduce pensions costs for the benefit of employers and shareholders.
This is of course on top of the zero pay rises (effectively cuts) that have been invoked by many companies over the past two years at a time when the Retail Prices Index has been rising at between 4 per cent and 5 per cent a year. So with the closure of Final Salary pensions along with frozen pay, the result for many has effectively been a wage cut over two years of around 24 per cent (i.e., 18 per cent pension contribution plus 8 per cent in retail price inflation) going into 2011 and counting.
As to the claim that 10 million of us alive today will attain age 100 – in 1981 there were roughly 2000 people in Britain who were aged 100 and at the start of 2011 there are 18,000. So by projecting forward we still have some way to go before we reach 10 million Britons aged 100 – unless of course there are huge numbers secretly hiding ready to leap out and join us now.
Later this month we have the former Labour minister Lord Hutton looking to proudly announce on behalf of the Coalition, that by having concocted a lower pensions actuarial discount factor – in plain English, by lowering the factor by which future cash flow is multiplied in order to arrive at its current value – he has miraculously managed to further inflate the pensions deficit in the public sector (despite last-minute warnings that Hutton’s exaggerations may scare markets, causing intentions to backfire). His claim is that the current official figures underestimate the size of the pensions deficit because they assume very high rates of interest will be earned on investments.
Every half per cent reduction in the actuarial discount factor increases the pension contribution by about 3 per cent or around £4 billion a year. Apart from plenty of mock concern, this particular trick from Hutton not only involves inflating longevity figures but also implies that the current artificially low rates of interest will last over the working lifetime of Britain’s current workforce, say 45 years hence.
It’s yet another example of straight line projected nonsense from a bunch of popinjays who can barely see much further than next week, let alone see a future for Britain, and are certainly clueless on where real rates of return will be in 5 years’ time, let alone in 45 years.
There is no pensions crisis in Britain – other than the consequences of the last 30-year or more attack on workers and our industries made by successive governments. They hate the notion of good pensions provision based on collective inter-generational funding, which at present is a method that would be very easy to restore.
Wealth not debt
That is especially so if we use the current £1,400 billion of pensions assets and savings to build up our industrial base to generate wealth, instead of what is currently planned by the government for our assets to be used as cover when international finance dumps its gilt holdings, i.e. the government’s own debt.
In fact what is happening is that foreign investors are already quietly selling British gilts at the top of the market and so obtaining the best possible prices by selling to British banks, who at the government’s behest are buying to shore up gilt prices. Effectively, there is a falling demand to buy and service British government debt and so the government’s plan through “regulatory prudence” is to create a captive British domestic market that will be forced to buy gilts.
The government’s Pensions Regulator has powers already in place to fine pension funds if they do not buy and hold gilts. The European Union’s new solvency arrangements (Solvency 2) sponsored by British quislings seek to make this requirement even more onerous.
In creating this enforced domestic market the idea is for our pension fund assets to be used as a debt transference mechanism – eventually resulting in a massive loss in our pensions capital value, whilst allowing foreign investors to disinvest from gilts and make off with their capital proceeds on the best possible terms and currency rates. Our funds are then set to go on to provide a source of future government funding by buying government debt that nobody else wants to service. In this respect it is also important to recall that last year the Bank of England bought £200 billion of gilts through “quantitative easing”. It is also currently looking to dump this useless debt on to us at the first available opportunity.
The other aspect about gilts is that when demand falls, causing yields to rise, this has the effect of not only increasing the government’s debt interest payments but also becomes a key mechanism in determining the retail rates of interest. So everything we hear about the Bank of England monetary committee setting interest rates is a complete nonsense. It is market movements over time covering 6-month to 10-year treasury stock that help to determine interest rates, £200 billion of Bank of England quantitative easing notwithstanding.