No pensions problem - just a profit problem

Pensions and the retirement age are under attack. Ex-Labour cabinet minister John Hutton has been appointed by the Conservative-Lib Dem coalition to head a commission that will look for ways to cut the cost of pensions for public sector workers.

In 2008 there were 3.6m members of occupational pension schemes in the private sector and 5.4m in the public sector. 87% of final salary schemes have closed to new entrants including high street names such as Boots, Barclays, Morrisons, Royal Bank of Scotland, the Post Office, IBM and Rentokil. 18% are also closed to existing staff – and this is likely to rise to 39% in the coming year.The average amount received from an occupational pension in 2006/7 was £68 for a single pensioner and £153 for a pensioner couple.

Due to mounting costs, employers are currently scaling back drastically the number of final salary (or defined benefit) pension schemes, that is, pensions where the final annuity is guaranteed as a proportion of the employee's final salary by the employer. That is, the onus is on them to make up any shortfall in receipts from the fund and pay the pension. This is as opposed to defined contribution pensions, wherein returns are not guaranteed and will only apply according to the sums invested, as with any other personal pension. This exposes the pensioners to the full market risk of investing in the stock market casino. This change in pension terms means a fall in employer contributions (defined contribution schemes are cheaper for them) and exposes them to less risk. As the TUC point out in their document Pensions in Peril: the Decline of the Final Salary Pension, Inland Revenue statistics indicate that employers have netted a sum of £19 billion through reducing pension contributions or taking contribution holidays on the back of the surpluses in the pension funds between 1988 and 2000. That is, they pocketed profits from the pension funds by the back door, using the revenue they generated to cut the amount of money they need to pay to wages out of current receipts. While some point to changing demographics – with an increasingly ageing population in Western countries – as a key reason for the pensions problem ( people living longer and likely future population trends has been known for years about and pension schemes will have already taken this into account.) What has caused the current financial problems for such schemes has been the unanticipated slump in stock exchange prices, people’s pensions being dependent on the vagaries of the stock market. Hardly a week passes without the announcement of some pension scheme being unable to meet its obligations.

As we have seen said, one problem is of a falling stock exchange. With the slump in stock market prices there have been capital losses rather than capital gains and many schemes have run into financial difficulties. Employers have been using this as a reason for cutting benefits. As pension payments are a huge burden on them the capitalist class have an interest in ensuring that the pensions paid out do not get too out of hand. Pensions are effectively deferred wages, with employers weighing their expected contribution to the pension fund off against current wages laid out.

The need for pensions arises from the fact that as workers get older, they become less able to work, and become surplus to the requirements of capital. Those workers have spent their lives selling their capacity to work, in return for a wage which represented the cost of maintaining and reproducing their capacity to go on doing that work. If they cannot work, they have no other means of securing their means of living. Since the capitalists do not want to hire them, and workers are unwilling to work until they drop, the capitalist class has to pay out to keep workers alive upon retirement. One of the non-productive activities that the capitalist State has to undertake is the maintenance of the poor, those members of the working class who are unable to work and therefore have no income from a wage or salary paid by an employer: the sick, the handicapped, the unemployed and of course the old. So in this sense pensions reflect the existence to the class struggle. For workers, the struggle is not only over the size of pensions, but over identity, security and, ultimately, working conditions too. The pensions problem within capitalism once more proves the market economy's incapacity to go beyond the limits of the wages system, and adequately provide for the needs of those who have worked all their lives. As the capitalist class endeavours to encourage us to share their interests, we find our lives opened up to the chaos and insanity of the stock market casino. But the market system cannot provide any security for us in the long run, which is why we need to turn the class struggle on the economic front into a fight for a society based upon the direct satisfaction of needs.

The source of all such unearned income is what Marx called the surplus value produced by workers over and above what they are paid.It is out of this unpaid labour that not only the idle rich but the whole non-productive superstructure of capitalist society (the armed forces, civil service, legal system, banking, and other money-handling activities) has to be maintained. What allows capitalism to maintain an enormous non-productive sector is the high level of productivity in the productive sector, a productivity which increases slowly but steadily all the time, historically at a rate of one to two percent a year ( means a near doubling of annual output over the next 40 years). Pensioners too are maintained out of this surplus. Pensions are a transfer payment from the profits of the capitalists, even if ultimately these profits come from what workers produce. So, even if the ‘over-burdened pension system’ was to be reduced, this would not benefit the working population since the capitalist class would never dream of passing this on as higher salaries.

With proportionately less workers engaged in production they are able to produce proportionately more wealth. It is the increasing productivity that will go on between now and when existing workers retire that will mean that society, even this capitalist society, will be able to support the expected increased proportion of retired people in the population. There no pensions problem.But don't believe us, Philip Sadler of the think tank Tomorrow's Company said there was no "ageing crisis...As a society we can afford to grow old," he said. "Rising productivity will outweigh any negative influence on living standards from an ageing population."

The motto of the ancient Roman slave owners was that slaves should work, or sleep. It seems the modern capitalists’ version of that term is that wage slaves must work till they drop.The advances in civilisation from our labour – including an increased life span – are being clawed back by capital to its advantage.We need to be clear, cutting pension levels and raising the retirement age of workers is a very real pay cut. We will be asked to work more years and for a greater proportion of our lives than we expected and all this for much less.

Rousing the unions to defend the workers’ position within capitalism, however, isn't our mission. The job of socialists is to show how we are robbed and exploited by the system ruled by capital and how we can untap the wealth of our collective productive power by taking control of the means of production, where the creation of second class cast-off workers known as pensioners would cease.