FT spills the beans on the great pensions rip-off

In 2005 there came into being the Pensions Protection Fund, with the stated aim of protecting workers’ pension rights should the company they worked for go bankrupt. By setting up a levy system, under which each company locked into defined benefit schemes contributed to a common fund from which in turn failing schemes could be bailed out, it was hoped to avoid the socially destabilising consequences of massive pensions defaults.

But with the pandemic accelerating the crisis of overproduction and tipping more and more companies into bankruptcy, doubts are being voiced over whether the PPF itself can keep its head above water.

This mutual insurance scheme never had as its primary motivation the safeguarding of workers’ solvency in retirement. In fact, the PPF has never fully compensated workers when their pension funds have gone belly up.

By contrast with every other defined benefit benefits scheme, the PPF is permitted to limit the annual benefits increase to less than the statutory minimum, so that in general it pays lower benefits over a worker’s lifetime than would have been the case had the scheme not gone bust. The true purpose of the PPF was more to curb the rage of workers than to offer them pensions justice.

But with the current wave of insolvencies, the pressure is on companies to push up their levy contributions in the hope of staving off a general collapse. And, sooner rather than later, capitalism will turn the screws on workers’ pension rights.

A partner at Lane Clark and Peacock (LCP), an actuarial consultancy, is cited by the Financial Times as warning that some large companies could face “six- or seven-figure increases” in the levy they pay to the Pension Protection Fund. (More than 800,000 UK employees short-changed on pensions by Delphine Strauss, Financial Times, 27 August 2020)

Whilst putting a brave face on matters and suggesting that even if insolvencies doubled the PPF could still weather the storm, LCP goes on to concede: “In a deeper downturn, which led to several large companies with big pension deficits failing – and a £20bn hit over six years – it could still avoid cutting benefits, but only by increasing the levies paid by its members, taking on more risk in its investments, or putting back the date at which it aimed to reach ‘self-sufficiency’.”

Finally, unable to avoid the conclusions of its own analysis, LCP admits that if some giant schemes with enormous deficits all hit on the PPF fund in quick succession, “more extreme measures” could be needed – by which is meant cutting into workers’ pension benefits, despite the fact that these are supposedly protected by law.

As always, when it comes to the crunch, the capitalist solution to the capitalist crisis always comes down to this: Make the workers pay.

Meanwhile, far removed from the world of defined benefit schemes, more and more workers are ‘lucky’ to have a pension scheme of any kind, let alone one with defined benefits. A new report by the Resolution Foundation cited in the same Financial Times article gives some idea of the real scale of the pensions’ rip-off, with agency workers, workers on zero-hours contracts and part-timers defrauded of their right to enrol in a proper pension scheme at all.

“One in 20 employees are not receiving the pension they are due, according to new research showing that agency workers, part-time and temporary staff and the low-paid are at much greater risk of being excluded from workplace schemes that would boost their earnings in retirement.

“More than 10 million workers have been automatically enrolled in a pension scheme since 2012 under a policy that obliges employers to enrol all those eligible and to pay contributions towards it.

“But the Resolution Foundation, a think-tank, estimates that more than 800,000 employees – close to one in 20 of those eligible – have either not been enrolled or are receiving contributions below the legal minimum. This is in addition to the 9 percent of employees who have chosen to opt out and the 19 percent who are not eligible for auto-enrolment because of their age or low earnings.

“The problem is especially prevalent in parts of the labour market where other breaches of the rules – such as failing to pay the minimum wage, offer paid holiday or provide a payslip – are common, the think-tank’s analysis found.

“Overall, 2.9 percent of permanent employees were not enrolled at all, it found, but this rose to 10.5 percent among agency workers, 7.4 percent for temporary workers and 8.6 percent for those earning close to the minimum wage. ‘These groups are also more likely than average to be short-changed even when they are enrolled,’ according to the study.”

And that’s just based on what bosses owned up to when responding to an official survey by the Office for National Statistics. Doubtless the real picture is many times worse.

The attack on workers’ pension rights, all the way from the relatively privileged strata to the marginalised precariat, is part and parcel of a concerted assault on the overall conditions of life of the whole working class.

Capitalism, not content with stealing workers’ unpaid labour in the present, is also conspiring to steal their right to a dignified retirement in the future.