Pensions - How Dare they?

Today the BBC have been reporting on the review of Public Sector Pensions by John Hutton. It would be interesting to see how much he was paid for a few weeks “work” chairing this review. This is the same John Hutton, who as a Labour MP was raking in large sums of money from giving his name to the Board of Hyperion Power Generation, of the US, and who was a legal advisor to the bosses organisation the CBI, for two years. It is the same John Hutton, who in the run up to the election, along with his colleague, Patricia Hewitt, who also rakes in large sums from associations with Big Business, did everything they could to scupper Labour, and help the Tories into power. Its no wonder that the Tories have repaid such support for their cause by giving Hutton this job. The surprise is that the Labour Party continue to allow such people to remain as members!

Hutton's report points out that those at the top of the Public Sector get more out for what they pay in than those at the bottom. There is no surprise there. That is true throughout every aspect of Capitalist Society. Those who sit on Boards of Companies like Hyperion get paid tens of thousands of pounds, just for having their name associated with it. The work they put in amounts at most to turning up for the odd Board Meeting every few months. Meanwhile, a worker at McDonalds works their butt off 8 hours a day and more, for a year to earn the same amount if they are lucky. In the Public Sector, at every higher echelon, its not just higher salaries that are enjoyed. The higher you go, the more holidays you get, the more you are entitled to get a cheap Lease Car at increasingly subsidised rates including the costs of Insurance and so on. This is the basic unfairness and inequality hard wired into Capitalism.

But, in this case, as with the proposals for bureaucratic control over “High Pay”, or the Tories mangled proposals over Child Benefit it is not the truly rich who are being targeted, it is not the Capitalists who make millions of pounds from their Capital alone, each year, but the Middle Class, and the purpose of that is to cover the real attack, which is on the workers below them, who will lose out proportionately more, once again. Hutton himself had to admit that the average Public Sector Pension was modest, but that didn't stop him arguing for cutting it! It didn't stop him arguing that the one piece of certainty that Public Sector workers have – that they have some idea what their pension will be when they finish work – should be removed with the scrapping of Final Salary Schemes.

But, the BBC's Panorama on Monday, showed who the real villains are when it came to workers Pensions. It was, not surprsingly, the same Financial Institutions that caused the Financial Crisis, and which is the reason the Tories are now trying to load the cost of that on to workers with cuts in services, and in pensions. It found that the investment of workers funds was almost like the kind of Ponzi scheme that others have recently been jailed for. It involved, workers money being taken in by Pension Companies, who then placed it with other institutions based on how much of a kick-back those institutions would give them, and a large cut in commission, and administration charges was deducted by each of these institutions. In total these organisations were deducting so much that workers pensions were being reduced by anything between 30%-60%.

“In one HSBC pension plan, £120,000 paid in over 40 years would result in fees and commissions totalling £99,900.

The company said its pension product is competitive.”

Panorama reported. They also compared this with the Netherlands where a scheme similar to the NEST (National Employment Savings Trust Scheme) proposed by the last Labour Government exists. That scheme provides its pensioners with pensions 50% higher, for the same contributions than the average UK Pension. Surprise, surprise, the Tories are proposing to scrap the NEST scheme.

One of the most shocking things from the Panorama programme was that one of the worst offenders was the Co-op Individual Personal Pension. Out of a total of £120,000 in deposits over 40 years, it would take out almost £96,000 in fees!!! That is disgraceful, and reflects what I have said elsewhere about the limitations of Consumer Co-ops and Mutuals compared with Worker Owned Co-ops. I demonstrated that difference in my blog Worker Co-operatives and Pensions, which showed that the average pension for a worker at the Spanish Mondragon Co-ops, is £13,600 a year. That compares with a pension of just £3,500 a year for the average Local Government worker in Britain!!!!

But, as I have also argued in the past at least with the Co-op, there is the possibility of exercising control and supervision. There is no such possibility with either the State Pension, which Governments tinker with at will, or with worker's company run Pension Schemes, which in reality just provide cheap finance for Big Capital, and as Panorama has demonstrated, a massive easy earner for those Financial Institutions who exercise control over them.
Its not as though, the returns these Institutions achieve are even very good, even without the deductions they make to line their own pockets. Panorama reported that nearly all of the Fund Managers charged with investing these vast sums – and who are themselves often paid in millions not thousands of pounds – fail to meet their own benchmarks! Workers would often have been better off just putting their money into a simple Tracker Fund that matched the returns of the various Stock and Bond markets!

But, of course, the Tories are not proposing a review of these Pension Funds, and the fact that workers in both the Public and private Sectors are being royally screwed, both by the exorbitant charges they make, and by the appalling lack of performance that those being paid such large sums have demonstrated. When Bernie Madoff did something similar with the money of the really rich, he was soon brought to book, and put behind bars, but the Finance Houses are free to rip off ordinary workers at will, and the Tories whose friends they are, are not going to lift a finger to stop them. Instead, they will ask workers once again to pick up the tab.

But, as I have said before - Why Won't The Unions Fight For Control Of Our Pensions - there is a solution to this short of the revolution. If every socialist, every trade unionist became an active member of the Co-op, we could demand an opening of its books, we could see exactly where the money is going. The Co-op says that much of its costs are due to the external costs of investment management. If that is the case, then there is a good case for bringing that in house to rein in those costs. Perhaps they could ask the Mondragon Co-op to take it over for them! But, having obtained that control, having created the kind of pension System that the workers at Mondragon are able to enjoy, then it should be incumbent upon our Trade Unions to insist that the money in all our other Pension Schemes be transferred to it, and that real Workers Control be exercised over it.



Once again we should not let the Liberal-Tories set the agenda. We should not see our only alternative to the cuts they propose to be to simply defend what we have. On the contrary, now is the best time to demand something better, something that takes control out of the hands of the bosses and their state, and gives it back to us.

See Also:permaculture - Mondragon - An Alaternative To Capitalism