Attacks against pensions on both sides of the Channel

22 May 2023

FRANCE: The fight against Macron’s “reforms” isn’t over yet

Over the last few months, millions of French workers and youth have demonstrated their opposition to an increase in the retirement age for the working population.  President Macron’s reform, which he is absolutely adamant is “necessary for the sake of the French economy”, means that instead of being able to retire at 62, workers will have to wait another two years, until they are 64, before receiving their pensions.

    In fact by pushing forward with this attack on pensions, Macron’s government has succeeded in uniting the French union leaderships against him - including those union federations which usually side with the government.  At their peak, the strikes and demonstrations drew between 1.2m and 3.5m protesters onto the streets - not only in the big cities, but also, most unusually, in smaller towns.  Workers from both the public and private sector came out, and for many, this was the first time they had ever attended a demonstration.

    By the end of March, amid almost daily demonstrations and a protracted bin-strike in Paris which left rubbish piled high everywhere, Macron was even forced to cancel a “Royal engagement” with Britain’s King Charles.  “King Emmanuel” obviously realised that the sight of such an outrageously expensive farce, scheduled to take place at the palace of Versailles, would just add fuel to the protesters’ fire.

    Of course, the British media and the political commentators put the large and lively protests - with a fair amount of anarchy each evening - down to the “revolutionary” French working class and its “love” for striking.  But there have been relatively few strikes or protests in France lately - not in fact since 2019, when pension reform was first attempted by Macron.  So for this reason, this movement has been all the more significant.

    We should add that it is not just the change to pensions that workers are angry about.  Just like in Britain, the cost of living crisis is biting - official inflation rose to 5.8% in April, and in addition to attacking pensions the government is enacting stringent cuts to social benefits and services.  At the same time, the profits of large companies have rocketed - £64bn in the first half of 2022 for the 40 biggest French companies of the CAC40 (the equivalent of the British FTSE100)!

By hook or by crook

Macron was and is absolutely intent on making this change.  And because he has been heading a minority government since the general election in April 2022, he has resorted to bypassing parliament in order to get his legislation through, by using a statutory instrument - article 49.3 - which was designed to be used in constitutional emergencies. When this was put into question by parliament the issue went to the Constitutional Court, which obligingly ruled that Macron did not break any statutes. So, on 14 April, he was able to sign his pension change into law, much to public disgust and the protests of a “united” opposition which included Marine Le Pen’s far-right Rassemblement National Français (formerly the National Front). And for sure, from the point of view of this capitalist system’s “rule of bourgeois law”, it certainly was “undemocratic”!

   It is reported by the French media that 60% of the public now say that Macron should resign.  And by the way, if the Constitutional Court had gone against him, he would have been obliged to call an election.  But passing a law is not enough, since there are other technical ways in which Macron could be blocked, although at this stage it is unlikely.  For instance, on June 8, MPs belonging to independent groupings in parliament are proposing a bill to repeal it.

    On the other hand, on 1 May, during the largest Labour Day demonstrations seen for many years, union leaders announced that they would have 14 more days of action in June - starting on the 6th.  Obviously it is escalating strikes and demonstrations which are more likely to cause Macron to back down, although at this stage he has little to lose by refusing to do so, since his popularity is at an all time low anyway.

The French state pension before Macron’s “reform”

Unlike in Britain, where nowadays, a defined benefit pension is the exception, most French workers will know how much their pensions will be when they retire.

    The public sector has its own special state pension scheme, which provides a basic pension of 75% of the average salary - calculated over the 6 last months before retirement - and benefits around 6m out of a total of 30m French workers.

    Private sector workers (there are 21m), on the other hand, can expect a lot less. Their basic pension is set by statute, at 50% of the average salary, calculated over their 25 best-paid years. This extended period compared to the public sector, immediately pushes the final sum downwards.  And to get this, these workers must contribute to the state-run social security pension system for a minimum number of years, divided into quarters. Already before Macron’s “reform”, this was 168 quarters, that is, 42 years in total!

    Those workers who haven’t contributed the full number of quarters, and this was the case for 13.2% of retirees in 2021, have the rate cut by 0.625% for each missing quarter. In other words they lose 2.5% of their pensions for every missing year! So for instance if you missed 5 years of contributions you would get paid a pension worth 37.5% of your average salary instead of 50%.  However, someone who had lost out in this way could still get paid a pension at the 50% rate when he/she reached 67 years of age.

    Just as in Britain, part-time workers, often women, will not get a full pension, due to breaks in employment and maternity leave. This leaves French women retirees with an average of only £630 per month.

    Over the entire retired population (including public sector employees on much higher pensions), the average pension in France is £1,230 per month (single) - that is, only £260 above France’s poverty threshold, which is £970 a month for a single person!

    Pensions guaranteed by the “social security” system, in 2022, averaged just £700 per month. For comparison, the full amount of Britain’s new state pension is £883 - provided, of course, that claimants have paid national insurance contributions for the full 35 years - 7 years fewer than in France.

Supplementary benefits, but not for all

If however, workers retire on pension incomes below a certain threshold - which was set at £846 (single) or £1,313 (for couples) per month - they can claim additional pension benefits to top their pensions up to this minimum.  There are more than half-a-million retired workers in France who need to claim this benefit. In other words, the state, which has imposed these “poverty pensions”, then allows those who are struggling as a result, to apply for help... And the amount they then get is £124 less than the poverty threshold (£970 single), acknowledged by this same state!

    But there are yet more conditions designed to screw the poorest. To be able to apply for this benefit, a retired worker has to reside in France for at least 6 months of the year. And this means that retiring migrant workers who wish to return to their homeland, and are most in need of the supplement because they worked in badly-paid jobs for most of their lives - are barred from receiving it.  And now, as part of its populist anti-migrant drive, the government has announced that it wants to increase this minimum period of residence in France to 9 months of the year!

Employers’ schemes

Just like in Britain, most active workers can “supplement” their pensions by additional contributions out of their wages, which can be matched by their employer. And most of these pensions then fit into the bracket of defined benefit schemes (the kind of scheme which is disappearing fast in Britain). But they nevertheless are not exactly fixed, since the point system which governs their value can be a matter of union-employer negotiation.

    These extra contributions earn workers “points”, and the cash value of each point is determined on an annual basis by a joint board of directors representing the bosses and trade union officials who negotiate this value according to the ups and downs of economic indicators; inflation, average wage levels, etc... and within certain limits.

    This system is therefore somewhat complicated and pension rates can remain much more fluid, depending, not only on the “market” of course, but the balance of forces between workers and bosses. Historically, at least, this has allowed union leaders to push the value of pensions upward to the benefit of workers using the unions’ bargaining power and the ever-present threat of strike action on the ground.

The context of Macron’s reforms

The “pension reform” announced on January 10 this year by the French Prime Minister Elisabeth Borne is the second attempt by Macron’s government to cut pensions. The first attempt, announced before the Covid pandemic in 2019 was met with massive street protests. So Macron put it aside. Now he is determined that it should happen.

    In fact this latest attack follows serial pension cuts, which began in earnest in the 1990s. From 1993 onwards, the number of years a worker had to contribute in order to receive a full pension was increased every few years, until it got to today’s minimum of 41-42 years! In 2006 there was a tightening of the rules for applying for pensions benefits. Then in 2010 the statutory pensionable age (SPA) was raised by two years, from 60 to 62 by the right-wing government of Nicholas Sarkozy.  When this was protested against, it was lowered back to 60 - but only for those who could still meet the minimum requirements - i.e., 41-42 years of contributions! In 2014, contribution rates were increased and pensions were cut.  Macron claims - of course - that the reform is vital for the sake of the French economy. The government’s objective is to save £132bn over the next ten years. So for this, the number of years needed to receive a full pension is to be increased to 172 quarters (i.e. 43 years) as early as 2027.  The legal retirement age will increase from 62 to 64 years by 2030, increasing by 4 months per year for every worker.

An attack hitting the poorest most

It should be mentioned that Macron’s government has cut unemployment benefits via another “reform” announced last November and which was implemented this February.  This change was also one done by decree, bypassing parliament, in fact.

    As French daily, “Le Monde” explained, it was “part of a contested reform designed to help fill vacant positions. Under the current rules, anyone under the age of 53 can claim a maximum of two years of compensation after losing their job, while those over-55 are eligible for three years.  By reducing the time by a quarter from February 2023, [the] Labour Minister...  hoped that 100,000- 150,000 people would return to the labour market earlier than expected next year.  ‘We’re keeping one of the most generous systems in Europe,’ he added...” The length of time which workers can claim benefits has now been cut by 25%.  So for instance, if a worker has worked 24 months and gets sacked, he or she will get benefits equivalent to an average of 75% of their lost wages for 18 months, instead of 24.  This cut, combined with the attacks on pensions could push many more older workers into poverty, since they would need to claim unemployment benefits if they cannot claim their pensions.

    It will affect the most exploited category of workers the most: those on precarious contracts doing heavy manual jobs, who are worn out well before retirement, or sacked well before reaching the legal retirement age.

    Indeed, today in France, half of the workers who reach retirement age are unemployed, sick or disabled! So now they will have to spend years on cut-down unemployment benefits, while waiting to receive a reduced pension at age 64!

    A point to add here is that compared to Britain, France’s unemployment benefits might well seem “generous”, as its Labour Minister boasts.  In Britain the dole bears no relation to wages - Jobseekers Allowance is paid at a flat rate for 26 weeks: £268.80 per month for workers up to 24 years old and £339.20 per month, for those 25 and over.  So for the sake of comparison, say a worker is on £1,200 per month, the benefit he/she would get in France would be £900 per month - 3 times the rate of a British worker on the dole. That said, the British unemployed can also apply (albeit with difficulty) for other benefi ts like help with rent, under the Universal Credit system.

Macron’s reform and the “concessions”...  so far

The French government’s reform aims at terminating the so-called “special” pension schemes in the public sector, won as the result of the struggles of railway and other state workers who fought for them over many years.

    By attacking these special pension schemes Macron obviously wants to try to play on the difference between those who have slightly better pension schemes and those who have worse ones.  But Prime Minister Elisabeth Borne - who Macron has decided should be the one to front this attack - has made it clear that the end of special pension schemes won’t affect those of the police, the military and firefighters. Naturally, the government wants to keep the most reactionary sections of the French electorate on board - and of course it cannot afford to have the police and military joining the protests!  Characteristic of its contempt for the poorest, Macron’s government promised to stop pension cuts for those who haven’t contributed their full number of quarter-years, on condition they retire at... 67!  Borne pretends that, for the sake of “justice”, employers will be required to make additional contributions to the pension supplement system.  But, since she doesn’t want to increase the bosses’ labour costs, she plans to reduce employers’ contributions for accidents at work and occupational diseases.

   She has also promised a minimum pension of 85% of the minimum wage (i.e., £1,275 per month) “for those who have had a full career at the level of the minimum wage”. But “a full career” on the minimum wage is an almost impossible condition to meet!

Is the movement over?

Now that the pension reform has become law, the movement against it has died down.  But over the course of the past 3 months - which included 14 strike days and mass demonstrations - it had the effect of shaking the government and the bosses behind them.  So even if in the end, this did not succeed in reversing Macron’s policy, it showed that the French working class and youth can and will still mobilise actively and enthusiastically, whenever they come under attack.  Of course they will only win - and it is the case in Britain too - if they are able to organise powerful, generalised strikes which in response, attack the profits and power of those who really run the economy: big business, the bankers, the financiers, that is, the very ones

BRITAIN: Miserable pensions; pensioners in poverty

Right-wing British commentators call French workers work-shy for “refusing” to work after 62 years of age.  Apparently the fact that British workers only receive a full state pension after the age of 66 - at 67 years in actual fact - is something to be proud of!  So never mind that British pensioners are amongst the poorest in the league of “rich” countries and amongst the least healthy, with declining life expectancy!

    In 2018-20, “disability-free life expectancy” was almost 20 years lower than total life expectancy - only 62 years for men and 60 for women!  Yet according to Tory politicians and their fan club (including many Labour MPs), it’s a good thing that workers must struggle on for another 4 (or 6!) years before they can draw their pensions.  And when they do retire, if they don’t have a decent occupational pension, or didn’t pay enough years of National Insurance Contributions, they get just £141.85 basic state pension per week! No wonder pensioner poverty is on the rise - now at 20% for single pensioners!  In France and Germany the state pays pensioners around half of average earnings.  If the British state did likewise, it would push the rate up by another £100/w.

    One could argue cynically that keeping the elderly on poverty wages and thus cutting their life expectancy is a way of keeping down state expenditure: fewer old people to pay pensions to...  especially since the proportion of elderly in the population is ever-rising.  And such cynicism is not out of place considering the comments of erstwhile Prime Minister Johnson who said “let the bodies pile high”, during the early days of the Covid pandemic when 30,000 elderly had died in care homes.

    For more than two decades, the British capitalist class and its politicians have been looking for ways to reduce pensions, so as to help cut labour costs, while squeezing more profits out of the pension system for the so-called finance “industry”.

    The difference between France and Britain is that in Britain, pension attacks began much earlier and have gone much further, but they also started with a much lower baseline.

    For the time being Prime Minister Rishi Sunak and his Chancellor of the Exchequer, Jeremy Hunt, have decided not to bring forward a further rise in retirement age to 68, since their government is already cracking at its seams.  Presumably this attack will be left to their successor - most likely Labour...

The miserly state of state pensions

The current level of the state pension in Britain (for workers claiming after 2016) based on full “national insurance contributions” (NICs) during one’s working life - that is for a minimum of 35 years - amounts to a £883 per month.  This is below the £920 poverty threshold for single pensioners.

    The minimum qualifying period for NICs was increased from 30 to 35 years for all those claiming state pensions after April 2016.  But it was already impossible for many workers to achieve even 30 years of full contributions, let alone 35 given the exponential rise of casualisation and self-employment (a bogus category whereby workers are not given an employment contract, and often work at the minimum wage) - and obviously out of the question for single parents who have children to look after!

    It is this predominance of precarious employment in the British working class which means that there is no way that the qualifying period for a full pension could be increased much more, without turning the chronic pensioner poverty which already exists, into an acute crisis.  And this no doubt accounts for the difference between the French and British systems - 42-3 years versus 35 to qualify for a similar pension rate....

    There is a complicated system of payments for the very many people who do not qualify for the new state pension.  But ultimately, many pensioners have to resort to applying for a “minimum income guarantee” or pension credit, which tops up pensions to £790 (single) or £1,200 (couple) per month - very far below the poverty line.  There are 1.4m pensioners in Britain who receive this!

    The average pension in Britain, across all categories of worker is £1,066 per month for a single pensioner - compared with £1,230 per month in France.  There are an estimated 15.5% British pensioners living under the poverty line (12.6% are men, 18% are women).  This places Britain behind most European countries, France and Germany, of course, but also Spain, Greece, Poland and even Turkey!

The end of final salary schemes

Since state pensions are not enough to live on, most workers also contribute to work-related (so-called occupational) pension schemes out of their wages every week or every month.  But here again, there have been successive cuts.  In particular, the bosses have either suspended or terminated final salary schemes (also called defined benefit or DB schemes), which were always called “gold plated” because pensions were based on a pre-defined amount, guaranteed to retirees by the employer and calculated as a percentage of their final salary and their length of service.

    A recent parliamentary Work and Pensions Committee launched an inquiry into these schemes.  It found that in 2022, of the estimated 26.9m private sector workers (out of 32.8m workers in Britain), fewer than one million contribute to a DB scheme - that is just 3.3%. This is down from 3.5m private sector workers (15.2%) who were contributing to these DB schemes in 2006.  These schemes have simply been phased out. And of course, even for the minority of private sector workers still on DB schemes, how much gold plating remains, when final wages have not risen with inflation, is another question.  Low wages under this system mean low pensions - and if these are the “best” pensions on offer, this is just another indictment of the system!

    When DB pension pots were “healthy”, i.e., in periods when future pensioners’ incomes could be sustained by active workers, employers pocketed pension schemes’ “surpluses” by taking pension contribution holidays.  They thus depleted pension funds - and were reluctant to make them up.  In fact because of several scandals in the early 2000s when pensioners were left high and dry after companies went bankrupt, in 2005 the government set up a compensation scheme for workers which would guarantee to pay their DB pensions in such an event, called the Pension Protection Fund.  Companies were (and are) expected to make mandatory contributions to this fund in order to keep it topped up.  Another reason for the bosses to opt out of offering this kind of pension.

    The financial crisis of 2007/8 reduced the value of DB schemes, but jobs were also cut, so that the regular contribution fl ow to the schemes was also reduced.  As a result, financial black holes appeared in these schemes, which bosses had the statutory obligation to plug. This is why most employers have since got rid of DB schemes and most new employees are now enrolled in schemes which are far less costly to employers and far less secure for workers - known as “defined contribution (DC) schemes”, because you only know how much you contribute, not how much pension you will get when you retire!

At the mercy of the market

In the private sector, close to 40% of workers are enrolled in DC schemes, which rely on the financial markets to dictate the level of pensions paid in the future.  The “pension fund” consisting of workers’ contributions is used to buy bonds (and shares which are “safe” and unlikely to decrease in value) so as to ensure a sufficient accrual in order to pay the members of the scheme after they retire.  In other words the workers’ future pensions are, in effect, in the hands of the stock market, which can go up, go down, or crash!

    The rise in casualisation, and therefore the increase in the number of workers who aren’t enrolled in any private pension scheme at all, forced the government to step in.  Under the Pensions Act of 2008, employers have a duty to give workers access to a workplace pension scheme.  And in fact the government provided them with the means to do that.

    So a National Employment Savings Trust (NEST) was set up, which is a DC scheme, run by the Nest Corporation, which is actually a public corporation of the Department of Work and Pensions! It has, to date, 9.9m members contributing to it, and is the largest of such schemes.

   However, it is used by just 17% of all small businesses - that is, 881,000 employers, who employ an average of 11 workers!  In other words, this is the main pension scheme for those workers who are forced to work for the small subcontracting cowboy companies, which have mushroomed everywhere! As for the contributions to the scheme, here again, workers bear the brunt: as of June 2021, to make up the minimum compulsory contribution which is 8% of earnings - workers have had to fork out 4% of their wages, while the employer pays 3% and 1% comes from tax relief, i.e., all taxpaying workers, including those enrolled in this scheme!

Plentiful loopholes

Employers have all sort of ways of avoiding their statutory “pension responsibilities”, however.  So for instance, to enrol in one such workplace DC scheme, one must be categorised as a “worker” as opposed to an “employee”.  And what is the difference?  Unlike an “employee”, a worker is in fact not directly employed by the company he or she actually works for.  By a legal sleight of hand (part of Britain’s opt-out from EU law in the pre-Brexit days!), “workers” are treated as if they were self-employed - but this is of course completely bogus.  However, it means the boss has no direct responsibility towards these workers.  It also means that all those companies which offer bogus “self-employed” jobs, like deliveries and couriers, do not have an obligation to offer a pension scheme.

    If such workers are, however, considered “eligible jobholders” - that is, they earn at least £833 per month - they are automatically enrolled in a DC scheme.  This leaves out millions of self-employed workers - and there are currently as many as 4.3m - in badly-paid part-time and/or casual jobs.  In fact, altogether there are 8.3m workers in part-time jobs in Britain, of which 5.9m are women.

    This means that a huge number of workers in the private sector do not have occupational pension schemes at all - and have to save their own pension “pot” in order to have a pension on retirement, which few manage to do. In 2021, as many as 27.8% of workers in the private sector (against 2.2% in the public sector) contributed to personal pensions.  This has doubled since 2012, due primarily to the exponential rise in the number of “self-employed” workers.  And then there are still 25% of private sector workers (and 9% in the public sector) who are not enrolled in a pension scheme at all, not even a personal one!

Public pensions aren’t better

Finally, there are the public sector pension schemes, which as in France, mostly pay much more generous, defined benefit (DB) pensions.  This is the reason why public sector pensions are in the government’s firing line.

    In fact 8 out of 10 of the nearly 6m public sector workers are enrolled in DB schemes.  But this does not mean that all such workers get decent pensions.

    The average pension for NHS staff in 2021 was only £800 per month - due to the fact that out of 1.4m NHS staff, about 600,000 are low-paid support staff and 150,000 are in part time jobs.  And it is much worse for the 77% of the NHS’s retired women workers, whose pensions are as low as £610 per month!

    As for the civil service, the National Audit Office in its most recent report (2020-21) gives the figure of £675 per month, for an average pension!  In fact, in local government the average pension is as little as £410 per month, and so most rely on means-tested welfare to top these pittances up, or depending on their work history, a personal pension plan. As was said before, low wages mean a low DB pension, since the amount you get is a fraction of your final salary.

    However, these miserly pensions are still too high, apparently! Already, the DB schemes in the public sector have been cut in several ways. For instance in 2015, the government changed most of the public sector final salary schemes to so-called “career average revalued earnings” (CARE) pension schemes, which are calculated according to the average salary of workers over their entire working life, instead of their final years. The argument was that final salary schemes in the public sector - including those for teachers, civil servants, the NHS, local government, police, armed forces and the judiciary - were all fundamentally “unfair” when compared to private sector schemes!

    Never mind the fact that it’s bosses in the private sector who fail to provide decent pension schemes, or even proper employment contracts, for that matter, and that they have been running down existing pension provisions over the past many years!

    Of course the state - in this “laissez-faire” capitalist world so loved by British politicians - would not dream of forcing private bosses to provide decent pensions. And certainly not when they provide such an excellent pretext to align public sector provisions downward!

    The government has also been able to reduce its public pension bill by increasing employee contributions (most are now above 4.5% of wages). And public pension costs have been massively reduced by linking them to annual increments based on the Consumer Price Index inflation rate, instead of the Retail Price Index (which takes into account housing costs and, therefore, is around 1% higher). Another important cost-reducing change is to increase pension age for schemes which still allow retirement at 60 (excluding instance police, armed forces and firefighters) in line with the increase in the state pension age, that is, 67 years by 2026!

Wages fit for retirement!

Despite record profits in the main sectors of the economy, workers are facing Austerity Mark 2.  Energy and oil giants have never had it so good. But in Britain the working class has not had it so bad since the 1970s.

    The savings that the government makes when attacking public sector pensions are handed back to the super-rich capitalist class in the form of tax allowances, subsidies and other give-aways.

    Of course, all workers need to retire on “living” pensions, and at an earlier age - instead of being forced to work on their late 60s for reduced pensions! In fact, there is no reason why decent pensions should be paid out of deductions from workers’ wages, whether directly via their contributions or through taxation. With the colossal profits that the capitalist class makes today, all of which comes out of the labour of the working class, this is where workers’ retirement wages should come from! Yes, a “living” retirement wage for all pensioners, funded collectively by the capitalist class, through a special tax on the wealth and income of all companies and shareholders, is an objective which could unite the ranks of all workers from all sectors, whether public or private.

15 May 2023