#66 - The pension system - racketeering workers from cradle to grave

December 2003


Today, pension provisions for all workers are under attack, both from the bosses and the state. By November this year the Financial Times was reporting that 60% of all British companies which had occupational pension schemes linked to the final salary of their workers had either closed these to new entrants, or ended them for all workers. Many others had taken measures to cut future pensioners' benefits and/or increase workers' contributions. As for the government, it has continued the Tory policy of running down the state pension system, and even announced that it would consider increasing the retirement age for civil service workers to 70 years.

These attacks on pension provision are just another aspect of the on-going drive to increase capitalist profits at the expense of the working class, by reducing companies' costs, channelling a larger part of workers' earnings into the clutches of financial institutions under the pretext that we need to "save" (never mind that so many cannot afford to) and redirecting more public funds towards the capitalists' coffers. But of course, this is not what Blair and his ministers tell us. No, they tell us that society can no longer afford to cater for its senior members - at least not for those who are not rich enough. It is argued that there will not be a sufficient number of active workers available to support the increasing proportion of elderly in the future.

But this is a spurious argument. Not that there is any shortage of pseudo-scientific statistics to back it up, of course. Official figures "predict", for instance, that the over-60s will represent 27% of the British population by 2031. But how can they be so sure? If Brown cannot "predict" the deficit of his own budget one year ahead, how can anyone predict the composition of the British population three decades ahead?

Some facts are known, however. For instance that between 1900 and 2000, the proportion of over-60s went up from 7% to 18% of the population - an 11% increase over a century. Why then should this proportion increase all of a sudden by another 9% in just 30 years? Unless, of course, such predictions are based on biased assumptions designed to provide precisely this alarming result. It is worth remembering that, in the 1930s and 1940s, there was a similar statistics-based hysteria, because at the time the birth rate appeared to be falling. On the basis of this trend, it had been predicted that by 1980 the population of Britain might fall as low as 29m, with 30% over 65 - and dire warnings were issued about the social and economic consequences. But in the 1950s the birth rate rose as young immigrants arrived from the ex-colonies, while women joined the labour force in large numbers. The predicted imbalance between workers and dependents in the economy did not occur, even though the longevity of the population increased. And by 1981 the UK population was around 56m and those over 60 made up 21%, well under the predicted 30% over-65s.

In reality, if there is an issue, it is not one of demography but one of social priorities and organisation. It is no coincidence that those who point to an ageing population as being the problem faced by society also happen to be those who insist that there is no future for society other than capitalism. When exposing the alleged "burden" of old-age for society, due to a shrinking active population, they conveniently "forget" three decisive points.

First, there is no reason to think that the doom merchants' prediction of a society dominated by a dependent elderly majority is inevitable. Not for demographic reasons, but because if people are living longer in the richer countries, it is because they are fitter, and therefore, with time, much fewer senior citizens will need to be dependent. Of course, this is assuming that society does not wear out or injure workers before they get to that age. It is a scandal that today, for instance, manual workers should die ten years earlier on average than other categories. This is assuming also that society is organised in such a way as to find the best means for all - including its elderly members - to play a useful role for the collective benefit of everyone. And all this would be made possible by the tremendous progress in science and technology as well as in medicine. But then, of course, such a social organisation does not fit very well with capitalist profiteering which aims at squeezing as much profit from the fittest before consigning them to the scrapheap!

Second the doom merchants ignore what can be learnt from the on-going increase of productivity over the past 100, 50 or even 20 years. So, for instance, it was due to this productivity increase that during the 15 years between 1979 and 1994, manufacturing was able to maintain output at the same level while cutting the workforce by 40%. So, tomorrow, even if fewer workers were to be employed productively, there is no reason to believe that this smaller number would be unable to produce enough wealth to cater for the needs of a much larger inactive population. Unless, of course, this profit-driven system carries on generating mass unemployment among potentially active workers, thereby constraining artificially the amount of wealth created, just because the wealthy find it more profitable to speculate on the financial markets rather than to invest in useful productive activities.

Third, and most importantly, what the doom merchants would like to conceal from us with their pseudo-scientific arguments is their real aim - to ensure that the proportion of the wealth produced in society which is hijacked by the tiny capitalist minority becomes even larger than it is today, meaning that there will be even less for the working class as a whole, and particularly for its "unprofitable" senior members and for the pension provisions made available to them.

But then, provisions for the old-aged have never been the result of the goodwill of the capitalist class. Rather, they have always reflected what the capitalists felt they had to be seen to be conceding to maintain social peace on the basis of the balance of class forces. And this is what the whole history of pension provision tells us.

Medieval society

In primitive societies, it was the fact of communal life itself, where everything was shared, which provided older members with their "pension" - that is, their means of sustenance. In tribal societies, having lots of children was regarded as an insurance policy against being neglected in old age. But with the emergence of class divisions in society, communal forms of existence began to melt away, when they were not broken up savagely by the new privileged classes.

Among the growing class of the exploited, those who could no longer work soon found that they were no longer allowed to eat either. Of course, since it just would not do to have too many old beggars or old stinking corpses, for that matter, littering the streets, every urban society in history has had to use one or other means to solve this problem.

So for instance even in pre-capitalist Ancient Greece, the care of the elderly became a matter for law. The Athenian elite were legally compelled to take responsibility for their parents and grandparents - the law placed their sons and grand-sons under the obligation of not mistreating them, of supplying them with food and accommodation and a decent burial. If they did not comply, they lost their civil rights, but if they did comply, their right to inherit their parents' wealth and property was protected. The very militaristic Athenian state even instituted the first form of "war pension" supporting the parents of sons who died in battle. But here we also see a distinct class divide arising. In the Athenian state, slaves only survived into old age if they were taken care of by their masters.

Throughout Europe during the Medieval period, various forms of provision for one's old age came into being. Given the general high mortality in the population there was no guarantee that parents would outlive their children, so other arrangements were necessary to formalise this inter-generational support. For instance, already by the 13th century, a "retirement contract" was commonplace, which allowed a tenant or owner to transfer control of his/her property to someone of their choosing in exchange for the provision of care or a pension for the rest of their lives. There was also something called a corrody introduced as early as the 12th century which entailed a formal gift or inheritance passed on to a religious home, monastery or hospital in exchange for residential care in old age. And because of the importance of the church in medieval societies, the fact that pensions for old age were usually provided for those who had served it, meant that a significant layer in the population could expect such minimal security on retirement.

By the 14th and 15th centuries, guilds and fraternities developed, which were lay organisations sometimes based on a craft but often also linked to the Church. The members paid an entrance fee which was low enough to admit all but the labouring poor. They operated on the principle of mutual aid, but were seldom able to provide cover for more than temporary crises or terminal illnesses and not prolonged retirement. In the early 16th century, the richer guilds in London could offer alms to the permanently disabled provided they had been members for more than 4 years. They also paid for funerals. Thus the elderly with property were able to survive.

Not so the elderly of the labouring classes and landless poor. Their struggle to survive grew harder and harder with advancing age, having no choice but to work until they dropped. In fact it was in medieval times that the first records are found in which old people are listed as having died of neglect and starvation.

This also affected those who had a skilled craft, since they could often not sustain their work once their eyes failed or their hands became arthritic - even if spectacles had been invented by the 13th century! Most local economies provided casual and low-paid occupations which were conventionally reserved for the elderly and unfit - in 16th century Norwich these are recorded as care taking, sweeping, portering, watching prisoners, keeping kitchen and turning spits. Craftsmen would work as common watchmen, so as not to be "chargeable to the parish as long as they were able" as a 17th century survey of working people in London records.

The rich were considered to have an obligation to help the destitute and the so-called "deserving poor". In this period those who qualified as "deserving" were the old and sick who were unable to labour. They might still have had to beg in the street however, but also were given assistance by the rich via institutions they set up. While monasteries were not considered very generous, between the 11th and 13th centuries, a large number of almshouses and hospitals were founded by gilds or fraternities formed by leading townsmen - and this was meant to bring credit and "God's indulgence" to the town... But class determined who was selected for help, particularly in the schemes in wealthier towns.

After the monasteries were dissolved, in the 16th century, many religious fraternities, and some of their almshouses and hospitals underwent closure. Ten years later, in London at least, hospitals were re-established to cater for the different categories of pauper. St Thomas' had primary responsibility for the aged. By the late 16th century poverty was such as serious problem that vigorous civic action was needed. In 1582, London's city authorities ordered all lame and aged people to be taken to St Thomas' Hospital. A recipient of regular civic poor relief came to be known as a "pensioner" - and in St Bartholomew exchange, in 1599, no pensioner could be under 66 years of age. There was a residential qualification of 3 to 6 years and the elderly were vetted on the basis of their "respectability". Relief was not a right - it was conditional on good behaviour and often good birth as well. And anyway, regular "pensions" were usually inadequate for subsistence, and had to be topped up from charity, earnings, friends or family, or begging, which was licenced and one of the only sources of income for the so -called "unsettled poor".

From one Poor Law to the next

By 1597, all of the formal and informal systems of relief were consolidated into the Poor Law, passed during the reign of Elizabeth 1 in 1601. So now for instance a parish would make regular money payments to the aged and those unable to work - supporting them in their own homes if possible or boarding them out with a pension. The parish also paid for burials - for obvious reasons. It was at the end of the 16th century that most parishes found themselves having to raise compulsory rates from citizens. By 1600 most larger towns levied a regular poor rate and by 1700 it was universal throughout England. It was thus that the elderly poor were able to receive handouts in order to survive. But if even remotely capable, they were expected to work.

By the 1700s, there were various attempts to cut Poor Law costs. One of these saw the establishment of workhouses, which at the time were not intended quite as the punitive institutions they became in the 19th century, but as an attempt to use up the potential of the able-bodied unemployed, since in this period there was high rural unemployment largely due to enclosures and a switch to large-scale sheep and cattle farming. The workhouses were also intended to provide cheap accommodation for the destitute and elderly - and in Kent, one of the first areas where they were built, the old aged were pushed into these. Parishes therefore considered that they no longer had to pay pensions to maintain people at home and the number of pensioners dependent on the Poor Rate dropped sharply. Workhouses became more and more overcrowded with old people - where they then very often succumbed to contagious diseases...

By the end of the 18th century, the explosive impact of the industrial revolution's urban expansion blew apart what was left of the network of informal family and social support for the elderly. The old, unable, worker now found himself completely isolated and alone and also completely out of the range of help from the Poor Rate in the rapidly expanding urban slums around the new factories.

The development of an economy based on commodity production by means of wage labour literally now meant that those who could not provide their labour for a wage were of no value to society whatsoever. This was the cold and inhuman logic of capitalist society. The wage slave was worse off than the serf - or even the true slave, who was owned body and soul by his master - since he was entirely dependent on his own ability to work in order to survive.

The new Poor Law Amendment Act, passed in 1834, aimed at pre-empting any attempt to leave the towns and seek poor relief from rural parishes. This punitive Act was a blatant instrument of control of the working population rather than relief - and aptly reflected the new bourgeois logic. So, for instance, Friedrich Engels described, in his portrayal of the Condition of the Working Class in England , the line taken by the Poor Law Commission in the run-up to the adoption of the new Act: "it was discovered that the whole of the working class was pauperised and more or less dependent on the rates, from which they received relief when wages were low; it was found that this system by which the unemployed were maintained, the ill-paid and parents of large families relieved, fathers of illegitimate children required to pay alimony, and poverty, in general, recognised as needing protection was to quote the Poor Law Commissioners, 'a check upon industry, a reward for improvident marriage, a stimulus to increase population and a means of counterbalancing the effect of an increased population upon wages; a national provision for discouraging the honest and industrious and protecting the lazy, vicious, and improvident; calculated to destroy the bonds of family life, hinder systematically the accumulation of capital, scatter that which is already accumulated and ruin the taxpayers.'"

All relief in money to the unemployed poor was therefore initially abolished by the 1834 Act. The only relief then allowed to them was admission to the workhouses. These became referred to as Poor Law Bastilles - like jails, but with poorer food. In 1844 this new Poor Law was extended by an amendment forcing rural parishes to place the transient homeless poor in similar institutions. But for the elderly, who were by far the largest group of paupers, it seems that in practice in many areas, there was still payment of meagre weekly pensions - so-called "outdoor relief" - although these were reduced and severe legal pressure was brought to bear on families to pay towards the upkeep of their elderly relatives. After all, it was cheaper to sustain them under their own roofs or those of relatives than to build the many additional workhouses which would have been required otherwise.

The campaign for Old Age Pensions

In 1878, a rural vicar, Canon William Blackley published an article on "National Insurance". Blackley's assertion was that social evils like idleness, drunkenness, and poverty stemmed primarily from what he termed "national improvidence" - and to back this up he cited the reliance of 700,000 citizens on the Poor Law which had to be paid for by the forced taxation of the "provident" of all classes. He thus proposed a system to wean workers away from any sense of solidarity with the class of paupers, whereby they would compulsorily contribute a lump sum of money early in their working lives into a state run fund which would then accumulate interest. Both sickness benefits and an old age retirement pension would then be paid out of the scheme when needed. The flaw in this scheme, however, was that most young workers were unable to afford a large enough lump sum for this to even begin to be possible. But his ideas precipitated a serious investigation into a national insurance scheme and state pensions.

It was also in this latter part of the 19th century that an organised trade union movement was emerging, partly influenced by socialist politics. Against a background of worsening conditions for older workers and increasing destitution in old age, this movement began to argue that pensions should be a right at the end of a working life. In parallel it also argued that a contribution to the Poor Rates should entitle one to receive back, in case of need, part of what one had contributed.

At the other end of the political spectrum, there is little doubt that the espousal of a state pension for the elderly by the former Liberal leader, Joseph Chamberlain, who joined the Conservatives in 1891, while primarily for electoral reasons was also a means of placating the growing agitation against the Poor Law. He justified his scheme for pensions saying there was "already serious popular discontent in many districts. Dangerous parliamentary agitation, which might break down the principles of the Poor Law is certain, unless steps are taken to convince the electorate that no unnecessary harshness obtains... The popular sentiment is strongest in the case of old age pauperism, and hence any well considered scheme of old age pensions will go far to strengthen the hands of Poor Law authorities in dealing stringently with able bodied as well as with what may be called criminal pauperism".

In Chamberlain's view, what was needed was simply a bold scheme to outflank the new socialists - in fact, in 1892, independent Labour MPs first took their seats in the House of Commons in the persons of Keir Hardie, John Burns and Havelock Wilson. However Chamberlain did not want a system such as that of the German Chancellor, Bismarck. Indeed, a compulsory workers' insurance scheme had been brought in 1889 in Germany, for the same reasons. But Chamberlain considered such a scheme too expensive and an infringement on personal liberty. So in the end he favoured a voluntary contributory insurance scheme.

It was Charles Booth, who owned a shipping firm, who helped provide much of the data on the elderly poor and whose own ideas for pensions helped publicise the idea of a tax-funded non-contributory state pension scheme. Booth realised two things, first that it was utterly impossible for most of the working class to save for old age, and that women, for whom this was even more impossible outnumbered men on Poor Law Relief.

His published survey of the "Aged poor in England and Wales" of 1889 was primarily inspired by his concern to reform the Poor Law and boost industrial efficiency. Booth felt that by resorting to "limited socialism", as state intervention was referred to already in those days, capitalism could flourish, but also eliminate poverty - provided that workers took on an individualist mentality. Older workers were simply not adaptable enough! Some system of income support for them was needed if the Poor Law was to be tightened up and industry further streamlined. To this extent his motive was the same as Chamberlain's.

Both Chamberlain's and Booth's proposals were opposed by two powerful vested interests of the time - the upper middle class Charity Organisation Society and the working class friendly societies. The former on the grounds that it was the thin end of a socialist wedge, which would undermine the independence, thrift and prudence of the working class, be appallingly wasteful, raise the rate of taxation, lead to income redistribution at a scale that was confiscatory and add to the present pauperism a new disguised form of pauperism.

The friendly societies, on the other hand, which were bodies with their roots in an ancient past, mainly provided for sickness and death benefit - paying for the funerals of members. These societies had in fact been state-regulated since the 18th century. By the end of the 19th century, with the development of the trade unions which instituted their own form of mutual aid (or friendly society), the number of people registered as belonging to a such a fund numbered over 8 million - that is just about half of adult males in Britain. But of course these were mainly the better paid members of the working class and lower middle class. Some of the societies had large funds and organisations which they felt a state system would infringe upon. However, not all of them were financially solvent. And eventually the recognition that the low paid and women, who had been excluded from friendly societies would benefit from a tax-funded state pension from 60 years, caused them to drop their opposition.

The first state pension

By the early 1900s, the "National Committee of Organised Labour for Promoting Old Age Pensions for All" had been set up by the Independent Labour Party and trade unions. It was this campaign which was largely responsible for the passing of the 1908 Old Age Pensions Act and ensuring that the scheme was non-contributory. The first old age pensions were paid on 1 January 1909 to 490,000 people.

In other words, this scheme was very limited in its coverage. Firstly, instead of being given universally to all those over 60 or 65, the qualifying age had been changed to 70 years. And it was means tested, thus cutting eligibility. Foreigners and their wives who had been living in the UK under 20 years before the age of 70 were excluded, and there were all kinds of other exclusions, like for anyone given a custodial sentence for a crime, those in mental asylums, those convicted of drunkenness, etc. However it was paid regardless of whether a recipient was in work. Women, who had previously been destitute, benefited from it disproportionately and in fact, even though it was a meagre sum (5s a week) it raised many of the aged poor out of abject poverty. For years the old age pension was referred to as the "Lloyd George" in tribute to the prime minister who had passed the act. In the first year, post office clerks whose job it was to give out the payments were brought gifts of flowers, fruit and sweets by grateful recipients. In 1911 the clause disqualifying paupers receiving outdoor relief under the Poor Law was abolished so that over 1m elderly received a state pension by March that year.

Of course the working class movement and trade unions considered that this Act left a lot to be desired, not least the age of qualification which they wanted to be cut to 60 years. They also wanted the means test and other disqualification clauses removed. By the end of WW1, the state pension had fallen to half its value due to galloping inflation. Special hardship supplements were provided by the government in 1916, and by 1919, these allowances were being paid to everyone as an interim measure. The Ryland Adkins Committee on Old Age Pensions was then set up the same year. It ended up proposing that state expenditure on pensions be doubled. And it relaxed some of the conditions which disqualified some of the elderly from receiving a pension. Bonar Law, conservative leader of the House, assured reluctant MPs that "if we succeed in passing this Bill, it will have a quieting effect on the general unrest which exists in the country." The fear of a working class backlash worked wonders, even with the most entrenched Tories!

A step backwards

By 1925 the new Conservative government took the opportunity of their coming back to power, after the first short-lived Labour government, to introduce contributory pensions, which they had been in favour of ever since Joseph Chamberlain's proposals thirty years before. Thus was passed the 1925 Act, which provided, in addition to the existing pension for the over-70s, a non means-tested pension between the ages of 65 and 70 years. All waged workers and their employers contributed a fixed amount to the scheme and the state subsidised the payments for the bridging period. This contributory scheme was not too popular with Labour MPs who were mostly (but not all) against a contributory scheme. As John Wheatley put it: "It suggests to me the case of a pickpocket taking my watch and presenting me with it afterwards and thinking he has done me a good turn in the process". Indeed it was a scheme to make the working class pay for their own poor - and to add insult to injury, at the same time the Chancellor, Winston Churchill, dispensed tax cuts to the wealthy.

The Depression years and the build-up to war brought with them alarmingly reactionary - and alarmist ideas. Demographers published reports of a falling birth rate in the context of an ageing population. This led people like William Beveridge to talk of "the ultimate disappearance of our population". But they never seemed to put two and two together. In fact the lowest fertility rate of the century coincided with the year of highest unemployment, 1933. In other words, with the worst year of the depression. This should hardly be surprising. However it did for a number of years give rise to movements such as the Eugenics Society which was concerned over the low birth rate of the "intellectual class" - which they considered would starve society of the best genes! Then there were quangos such as the Political and Economic Planning research group, known as PEP. This was an independent think tank of middle class middle-of-the-roaders who had apparently learned the lessons of the past and understood that capital accumulation needed stable social conditions and therefore a measure of well-planned social reforms were necessary to stave off unrest. Nothing new in fact.

But their ideas coincided with those of Labour leaders of the time like Ernest Bevin and Oswald Mosley who saw an answer to the high unemployment of the time in the redistribution of jobs from the elderly workers to younger ones by introducing compulsory retirement - even at 55 years - but with an improved pension scheme as compensation. At the same time they looked at raising the school leaving age to 16 years, with the same aim of job redistribution to the middle category of worker. Various retirement pension plans were put forward, but in the end they were all dropped, mainly because of reaction against the idea of compelling workers to retire at a certain age and the possible cost to the state. Besides, by 1935, unemployment began to decrease again.

By the end of the 1930s it was evident that there was a great deal of invisible pensioner poverty. The government claimed this was not so, because out of a total of 2.3m old age pensioners in 1938, only 272,000 (10%) claimed public assistance which was the old Poor Law relief. In fact this statistic was exposed for what it was when in 1940 Assistance Board supplementary pensions were introduced. Within 2 months of the introduction of the scheme, 1.2m applications were received - a figure which shocked public opinion. The Times newspaper spoke of the "remarkable discovery of secret need".

It was also at that point that insured women were allowed to receive contributory pensions from the age of 60 years, rather than 65. The following year the means test was virtually abolished. The establishment of the Beveridge Committee in May 1941, and the war itself delayed temporarily further progress on pension reform - and indeed the demand for a universal non-contributory pension. However The Pensioner, the mouthpiece of the Pensioners Federation, pointed out that in its second year the war was costing £9m a day and every three days therefore the nation was spending on war what the chancellor had said would bring financial "ruin" if spent on pensions in a year...

Occupational pensions.

Before WWII, state pension provision was not the only form of pension for workers, however. Occupational pensions of some sort already played a significant role in Britain.

Among the forerunners of occupational pensions were annuity payments which appeared in the civil service as early as the 17th century. In the biggest and most important state department, Customs and Excise, practice at this time was to sell one's job to a successor for an annuity or a lump sum to finance one's retirement (a similar practice pertained among army and navy officers and in the fee-paying professions). By the early years of the 18th century, the scheme was formalised so that all grades in Customs and Excise financed the retirement of their predecessors, paying a fixed sum out of their salaries - which provided a pension for retirees of one third of their final salary. The Customs Commissioners, by the end of the 18th century were recommending that superannuation should be paid as a public responsibility in the interests of developing an efficient public service of "high probity".

In 1810, a non-contributory pension scheme was extended to the whole of the civil service to eliminate corruption and patronage. It was paid above the age of 60, although, with a doctor's certificate it could be paid before this age. By 1828, a pension had become a right at the age of 60, although the cost of this scheme led to backtracking on this in later years, so that most civil servants tended to retire later, between 60 and 64 years with a compulsory retirement age mooted at 65 years.

Although other public employees aspired to a similar pension, it was only in the 1890s that a compulsory contributory scheme was introduced for teachers in state elementary schools - a fixed annual contribution was paid by each teacher and their pension depended on the number of years of contribution rather than their final salary, unlike in the civil service. In 1918, the scheme was replaced with one similar to that in the civil service. Police, Poor Law officials and local government officials all acquired pension schemes in the late 19th century though these were less generous than that of the Civil service and only became uniform in 1922.

Private sector pensions were not systematically surveyed until 1936, so data on these is patchy. However, in many firms the bosses merely kept aged workers on as long as possible - and this was meant to be considered as a sign of great generosity - by giving them less onerous jobs when they reached old age - such as making tea or sweeping up.

In the late 17th century, companies linked to the state like the East India Company and the Bank of England provided occupational pensions by statute, and in some occupations an attempt was made to force workers to contribute to funds providing sickness and old age benefits but these were short-lived. Formal pension schemes did however develop in big firms - for instance the 19th century railway companies, which by the 1860s ran compulsory contributory schemes providing sickness, superannuation and funeral allowances. They paid small pensions weekly after a minimum of 25 years service. Managers in big firms were usually not included in such schemes as they were often given generous informal endowments on retirement.

In the mining industry, workers' mutual aid funds provided pensions for workers by the late 1800s, which were funded by a mixture of employer and workers' contributions, investment income and charitable donations. The miners themselves usually controlled them, while employers deducted the contributions from workers' wages.

In 1906, Seebohm Rowntree introduced a pension scheme in his York chocolate factory justifying it as follows: "If a firm establishes a liberal pension scheme it will doubtless at the same time fix a definite retirement age and will thus never find itself with a number of old workers of low working capacity drawing full pay... such employees are very costly, not only does the firm lose out on them individually , but their presence tends to lower the pace of the whole shop..." Obviously, the issue for Rowntree was not so much workers' welfare as business efficiency!

The expansion of occupational schemes in the years between WW1 and WW2 was fuelled by the insurance companies adopting aggressive methods of selling pensions packages to employers, something which had already been adopted in the USA. They promoted these as part of "modern business practice". These insurance companies could provide the financial management of schemes - something which would have raised difficulties for smaller companies.

In 1936, the first government survey of occupational pension schemes found that 6,544 employers had schemes in operation - but only 1,600 of these were for manual workers. In fact 1 in 8 workers were now in such a scheme as opposed to perhaps 1 in 20 in 1900.

"Welfare" state and charity by stealth

Once the war was over, the need to restore capitalist profits as fast as possible, while pre-empting any risk of social unrest, shaped the cross-party consensus which presided over the establishment of welfare provisions. Compared to all previous schemes, however, the pension system which came out of the so-called "welfare state" from 1947, had two progressive features.

First, the new Basic State Pension (BSP) was a flat-rate universal benefit. This meant that, in theory at least, poor pensioners would no longer have to bear the humiliation of relying on state charity. Second, the BSP was based on the idea that the generation in work would provide collectively for the pensions of those in retirement, through its National Insurance contributions. If these contributions were not enough to pay for pensions, public funds would fill the gap, thereby adding a contribution from all taxpayers, including, in particular, the wealthy. It was taken for granted, therefore, that society as a whole was responsible for the livelihoods of its senior members and that this fundamental solidarity between generations would enable the system to perpetuate itself.

However, like every other aspect of Labour's postwar reforms, these provisions for the aged were primarily designed to give a helping hand to British capital in rebuilding its profits. By granting retired workers a universal pension, the Labour government relieved working class families from some of the burden of providing for the aged. But its main aim was to allow companies to keep wages to minimum levels.

As a result the Basic State Pension was never designed to pull pensioners out of poverty. When it came into operation, in 1948, it was set at a mere 19% of average earnings. This was so low that hundreds of thousands still had to go through the humiliating process of applying for additional means-tested benefits. And no fewer than 638,000 among them were found to qualify for the so-called "National Assistance Supplements." For all the rhetoric about universality, therefore, the new Basic State Pension still left the poorest no choice other than to rely on state charity.

Beveridge had predicted that, if his scheme was followed, the Basic State Pension would eventually reach subsistence level for all pensioners within two decades. But it never did. Predictably too, as the primary aim of the scheme was that it should be as cheap as possible to the capitalist class and its state. So the contribution of the Treasury to the scheme was always kept to a minimum, leaving the Basic Pension to rely mostly on NI contributions.

What made matters even worse was the small print attached by the Labour government to the Basic Pension. Protecting its value against inflation was left entirely to the goodwill of governments which were always more preoccupied with reducing public expenditure than pensioners' poverty. Besides, after a transitional period, an element of proportionality was phased in, in the calculation of pension payments. To get the full amount of their pensions, male workers had to have paid contributions for a minimum 44 years and female workers 39 years. This meant, in particular, that many women, who tended to give up paid work for long periods of time in order to bring up children, were often only entitled to a fraction of an already derisory pension. Over time, the means-tested element in pensioners' earnings increased considerably, far beyond its 13% average level in 1948. So much so, that today it is well over 40%.

The welfare of British capital comes first

Contrary to what happened, for instance, in the NHS or the mining industry, there was no attempt by the postwar Labour government to bring together the new Basic State Pension and the many existing private pension schemes within one single state-controlled pension system.

And yet, from the pensioners' point of view, such a unified scheme would have made a lot more sense in every respect. In particular, it would have put all workers on an equal footing, whether they worked in a large company running an occupational scheme or in a smaller one with no in-house pension provisions. It would have resolved once and for all the thorny question of what happened to workers' pension rights when they transferred from one company to another - a problem which has yet to be resolved to-date. And it would have protected all pensioners against the chaotic behaviour of the financial markets as well as from employers' dirty tricks - although not from government attacks, of course, but then neither did the occupational schemes.

However, there was one obvious obstacle to the unification of all pension provisions - the fact that the pensions paid by occupational schemes were often, in theory at least, higher than the planned level of the Basic Pension. A universal unified state system would have required, therefore, a quite significant increase in the value of the BSP for all future pensioners - something that the Labour government was not even prepared to consider.

Among the strongest opponents to a unified pension system were the union machineries. This may seem paradoxical, but only superficially so. Occupational schemes were a corner stone of the entrenched sectionalism from which the union machineries derived their rival existences. Besides, they provided a useful fig leaf to conceal the unions' ineffectiveness at defending workers' basic interests. While it was always hard to extract concessions over wages and conditions at the bargaining table, it was usually easier to "win" alleged "gains" in pension provisions - all the more so as, usually, these "gains" were only due to kick off at some later point. Nevertheless such "gains" could still be portrayed as bargaining "victories" in front of a workforce which had serious reason to be worried about its future after retirement.

Above all, the capitalist class itself was dead against a unified system. Occupational schemes were a convenient tool for the bosses. After all, they were able to choose what contributions they made. Often, they were even able to choose who was awarded a pension and who was not, and to set the pension's value more or less arbitrarily. When workers left a job, whether out of their own choosing or because they were sacked, they usually lost part, if not all, of their pension entitlement and sometimes, even, their past contributions. Individual workers had very little redress in such matters, especially once they were no longer at work. This made occupational schemes very cheap to run, especially as they were funded out of the workers' own wages anyway. And their real cost to employers was all the lower as, in those days, there were not even the very limited constraints that exist today on what they could do with their employees' pension pots.

Among the capitalists, of course, those in banking and insurance had particular reason to oppose a unified pension system. They managed pension funds on behalf of specific professional groups and they certainly did not fancy losing this business nor the tax breaks which were attached to it. Indeed, they had already their eyes set on the management of the much larger occupational scheme funds.

Cross-party consensus against the poorest

In other words, in the 1940s, there was an unholy alliance spanning from the City and big companies to Transport House, which supported not only the continuation, but actually the expansion of the antiquated, ineffective pre-war system of occupational schemes - as opposed to an integrated state-run pension system.

Despite some opposition from among its own ranks, the Labour government obliged. Tax incentives for collective private pension schemes were extended far beyond pre-war levels. So much so that, by 1953, 8m workers representing one-third of the workforce - mostly in white-collar and public sector jobs - were covered by occupational schemes, as opposed to 1.8m in 1936. By that time, the tax exemptions benefiting these schemes totalled £100m - more than twice the puny amount provided by the Treasury to prop up the Basic State Pension. Significantly, the Tories, who, by then, were back in office, felt no need to make any change to Labour's pension legislation.

In fact, leaving aside the usual bouts of political posturing, there was virtually a cross-party consensus on the issue of pension provision during the 25 years or so which followed WWII. The Tories never put into question the so-called universal element of the system, represented by the Basic Pension, no doubt because it was so low and, therefore, cheap. Labour never put into question the right of the finance industry to benefit both from large tax breaks and the huge profits it made from managing occupational pensions. Both parties excluded any increase of the Basic State Pension which could have ended the dependency of the poorest on means-tested benefit. Instead they supported the idea of a second pension, operating as a kind of state-run occupational scheme, in which the dividends produced by each individual's contributions would eventually accumulate to generate a second pension, which would be more or less proportional to the contributions made.

Of course, such a scheme could not benefit the poorest, as they would be unable to pay an additional contribution towards their pensions anyway. But it could benefit better paid workers who, for one reason or another, were not members of occupational schemes. Besides, most of the union machineries strongly supported the principle of linking the value of pensions to wages, as this was more palatable to the skilled hard core of their membership. However, for both political parties, this second pension was intended primarily to channel another huge flow of fresh money towards the financial markets.

All this is illustrated by the "National Superannuation Scheme", a blueprint for such a second state pension, which became Labour's official policy at the party's 1957 conference. This blueprint was the brainchild of Richard Crossman, then considered as one of Labour's "radical" reformers. Yet, there was nothing radical in this scheme, at least not in social terms. The aim was to provide a pension worth half average earnings - but only at some later stage. True, it did provide for a certain amount of "redistribution" in that it had been designed so that the low-paid would, theoretically, get proportionally slighter higher returns on their contributions than the better-paid. But it said nothing about how the low-paid were supposed to find the money for the additional contributions they would be required to make.

In order not to antagonise companies and union leaders, Crossman had introduced the possibility for employers who already ran an occupational scheme, to opt out. More importantly from the point of view of its actual aims, the funds collected through this scheme were to be invested partly in government bonds, thereby helping to finance public investment, and partly in private sector shares. This latter use was highlighted by a Labour policy paper which stressed: "We must plan for a surplus in pension account and see that this surplus is invested in industry to create a larger national income." In other words, workers' pension savings were meant to feather the capitalists' nest under the pretext of promoting British industry!

Ironically, however, it was the Tories who implemented Crossman's plan, although in a much watered-down version. In 1961, Macmillan introduced the "Graduated Retirement Benefit", which required workers to pay an additional low percentage of their wages, up to a £15/w ceiling. The total contributions paid by each worker over his or her lifetime determined the value of his second pension on the basis of a fixed rate of 5p/w for every £15 of contribution. The resulting second pension was, at best ridiculous, especially as there was no provision for inflation-proofing. Not only was it lower than even the worst occupational scheme, but it was even well under the level of the Basic Pension. But then, Macmillan did not want to create a rival pension to the existing occupational schemes and companies were duly allowed to opt out from his second pension. In fact, it seems that Macmillan's only objective, apart from being able to pretend that he was doing "something" for future pensioners, was to increase National Insurance contributions by stealth.

The myths of the 1960-70s

When Labour came back to power in 1964, the new prime minister, Harold Wilson, happened to be one of the so-called "radical reformers" who had been part of Crossman's team in 1957. However, this did not prevent Crossman's pension blueprint from being put on the backburner. Despite the trade unions and pensioners' groups campaigning for the repeal of Macmillan's legislation, Wilson was far too wary of being accused of rocking the boat to make even such a limited concession.

Instead, Wilson initiated the first ever attempt to merge the welfare and tax systems by introducing - already! - a tax-credit scheme and a guaranteed minimum income. At first, the new scheme was targeted at pensioners, with the aim of ending completely their need to claim for means-tested benefits. The plan was to expand the scheme later to all other claimants. One of its aims, of course, apart from simplifying a benefit system which was already unbelievably complicated, was to make savings by merging part of the Social Security administration with the Inland Revenue.

However, it was soon realised that the yearly tax assessment made by the Inland Revenue was incompatible with the much more frequent changes in pensioners' circumstances - with the risk of many pensioners being let down at times when they were the most in need of help. More decisively, as it turned out, the Inland Revenue wanted nothing to do with handing out tax credits to pensioners. So, within less than a year, the project had to be dropped. Five years later, it was to be tried again in a slightly different form by Heath's Tory government, only to fail for exactly the same reasons.

To replace his tax credit scheme, Wilson re-branded the old National Assistance Board into a new Supplementary Benefits Commission. Various cosmetic changes were made to give the poor the impression that claiming Supplementary Benefits was claiming a right, rather than claiming state charity. But the substance remained the same. Meanwhile, as the Basic State Pension remained unchanged against the backdrop of rising inflation, pensioners' dependence on means-tested benefits was increasing faster than ever.

It was only in 1974, after four years in opposition, that Labour decided the time had come to show some decisiveness. Since the beginning of the 1970s, inflation had been running at an average 12.5% per year, thereby reducing rapidly the value of the Basic Pension. So, within eleven days of Wilson's return to power, he announced that from the following year, the Basic Pension would be indexed on prices or earnings, whichever increased faster. This allowed the Basic Pension to reach its highest relative level ever by 1979, at 20% of average earnings - which was a progress, but still far from Beveridge's proposed "subsistence" pension.

At the same time, Crossman's old blueprint for a second pension was dusted off and a revamping operation launched with the aim of achieving a cross-party consensus. The result was SERPS, the State Earnings Related Scheme. It provided, on top of the Basic Pension, an earnings-related pension worth 25% of the average best twenty years of earnings for a middle-ranking earner. Unlike the 44 years of contributions which were required to get the full amount of the Basic Pension, only 20 years were necessary to get the full amount of SERPS. Unlike for the Basic Pension as well, provisions were made for contributions to be paid by the state on behalf of workers during periods of unemployment, sickness and maternity. Last but not least, for the first time in any state pension scheme in Britain, SERPS also gave women workers the same rights as men.

On paper this sounded great. However there was the small print. Although SERPS was funded on a Pay-As-You-Earn basis, by turning the flat-rate National Insurance contribution into one which was proportional to wages, this contribution was more proportional for some than for others. So, while most of the wages of an ordinary worker would be taxed for National Insurance purposes, company directors, earning maybe twenty times as much, would be taxed on only a tiny part of their salaries. The pretext for this was that only this part of the directors' salaries would be taken into account to compute the value of their SERPS pensions. Such were the limitations of Labour's so-called "redistributive policies". They were never meant to "redistribute" the wealth of the rich.

Besides, SERPS had no provisions to alleviate the plight of new pensioners in the short term. Since future pensioners had to contribute for at least 20 years before they could get the full amount of SERPS, only those retiring from 1998 - 20 years after the implementation of SERPS - would benefit fully. By that time, the odds were that another pension reform would have been carried out by the Tories, cancelling out some or all of the improvements introduced by Labour - which was exactly what happened.

Of course, things might have been different had the Labour governments of the 1970s transformed the pension system radically enough to make it virtually impossible for the next administrations to turn the clock back - at least not without facing great political opposition and practical difficulties. This could have been achieved, for instance, by setting up the state-controlled integrated pension system that the postwar Labour government had failed to create. But the Labour leaders had no such aim. Just as they were keen to get their reform through on the basis of a cross-party consensus, they were determined to have the capitalists' backing.

So, SERPS did nothing to bring an end to the grip of the finance industry over pensions. Like Crossman's scheme, it allowed occupational scheme members to opt out collectively in exchange for a reduction in the NI contributions paid by both employers and employees. In fact it went much further, by making it compulsory for workers in a company which ran an occupational scheme to join it and for their employers to contribute to the scheme. Tax exemptions to private pensions reached record level as workers flocked into occupational funds set up by employers who preferred to run their own fund rather than pay higher NI contributions. And as, by then, most of these schemes were run one way or another by banks, fund managers, brokers and insurance companies, the finance industry certainly had nothing to complain about. On the contrary, its dominant role in the sphere of pensions was now institutionalised.

It should come as no surprise, therefore, that the Bill establishing SERPS was passed unopposed, in 1975, with fewer than a dozen MPs in the House. Ironically the then Tory Shadow Pension secretary and the Tory spokesman who waved the Bill through on that day were the same people who, just over a decade later, were to put the last nail in SERPS' coffin. Their names were Margaret Thatcher and Norman Fowler.

Thatcher's all-out offensive

The return of the Tories to government, in 1979, marked the beginning of a new era in Britain - an era which had already begun in the US and, although to a lesser extent, in Japan. The series of currency, trade and production crises which had affected the world economy throughout the 1970s had convinced the capitalist classes that drastic measures had to be taken if profits were to be maintained. This involved, of course, turning the screw on the working class, but also diverting a much larger share of public funds towards the capitalists' coffers. The Labour governments had already made tentative gestures in this direction, by attempting to force austerity measures down the throats of workers - but with little success due to their militant reactions. Thatcher's government proceeded to follow the same track, only with more determination.

One of its first gestures was to launch a full-scale review of the pension system, in order to find ways of cutting its cost to the state. Out of this came, in 1980, the apparently innocuous decision to get rid of the link between the Basic State Pension and earnings - with the catastrophic result that, by 1997, its value was down to just 15% of average earnings. It was also as a result of the same review that the proposal to dispose of SERPS was made. However, fearing an electoral backlash, Thatcher decided to postpone its implementation till the next general election.

In the event, she waited another six years before returning to her plans against SERPS. Thatcher and most of her ministers wanted to replace SERPS with a system of compulsory private pensions - whether occupational or individual - propped up by tax incentives. However, when it came to assessing the total cost of these incentives to the Treasury, Chancellor Nigel Lawson found that this would be just too expensive. Probably even more decisive was the opposition of the capitalists themselves. The finance institutions, in particular, did not want to have to face a large inflow of mainly small accounts - since many of the workers covered by SERPS tended to be low-paid.

In the end, it was decided to retain SERPS. Rather than compulsion, the 1986 Pensions Act introduced massive tax incentives to encourage workers to opt out, not just from SERPS but also from existing occupational pension schemes and take individual pension plans. Compulsory membership of an occupational pension scheme as a condition of employment was made illegal, while employers were no longer required by law to contribute to these schemes. As to SERPS itself, its provisions were significantly reduced, with the calculated aim to halve its long-term cost to the Treasury. As a first stage, its value was cut from 25% of one's average best 20 years to 20% of one's average salary over a lifetime. Besides, a clause was added providing that from 2000 onwards, only half the pension, instead of the whole, would be passed on to widows.

Although it did not admit it explicitly, the 1986 Pensions Act effectively paved the way for the winding up of SERPS by reducing its value in stages. As it happened, Thatcher did not have enough time to complete the task she had undertaken. But as we will see, Blair's Labour government more than made up for Thatcher's failure!

However, before that happened, the Tories dealt a last major blow to the pension system. In 1993, just as Michael Portillo was launching his major attack against the jobless with the introduction of the Jobseekers' Allowance, a new piece of legislation provided that women's retirement age would be raised from 60 to 65, with the increase phased in between 2010 and 2020. Even more than any other, this change, which was introduced under the ludicrous pretext of respecting "sex equality", certainly showed the direction in which things were moving - that is backwards.

Blair finishes off Thatcher's job

Long before Labour's return to power, Blair made no secret of his views on welfare in general and pension provision in particular. Labour, he said, was "not about bigger benefits but moving people from benefit to work." The state, he added, should offer "a hand up" not "a hand out." Soon the meaning of these Tory soundbites was spelt out when, after the 1997 election, none of the Tories' benefit and pension cuts were reversed, not even the Tories' attack on women's retirement age or widows' rights, which is rather ironical coming from such a politically correct government!

By November 1997, a consultation document defined Labour's aim as reducing the share of the state in pension provision from 60% of the total to 40%. A year later, Social Security minister Alastair Darling put it even more bluntly in the Commons: "it is my intention to ensure that we amend the system further so that, if people stay in the state system, they will lose money."

Despite his election manifesto's commitment to "retain SERPS for those who wish to remain in it", it was therefore clear that Blair's aim was, just as Thatcher's had been, to run down the state pension system in order to channel the savings made by working people for their old age into the claws of the finance giants, while cutting state pension expenditure.

Significantly, Blair's so-called new "radical" reforms borrowed from a combination of old sources: Wilson's failed attempt at integrating the tax and benefit system and a similar failed scheme under Heath's Tory government; a blueprint produced by Tory minister Peter Lilley in 1996, which was never implemented; and, of course, Thatcher's own plans. Initially these "reforms" involved three strands.

First, in 2000, a Minimum Income Guarantee was introduced with much fanfare by Brown. In fact, this was merely a re-branded version of income support for pensioners, which gave them an additional £5.45/w at most. Of course, Brown did not brag about the fact that this "spectacular" measure to "help pensioners out of poverty" only cost the Treasury a mere £800m/yr for a population of over 10m pensioners!

Then, from April 2002, SERPS was closed to new entrants and replaced with another second pension called S2P, which will become less and less earnings-related until it finally becomes a flat-rate pension targeted at the low-paid, in 2007.

At the same time, the government was advertising at great cost a new state-sponsored system of private pension schemes, or "stakeholders'" pensions as Blair called them, which were supposed to be affordable and efficient savings instruments for ordinary workers. These were meant to serve as a private-sector alternative to S2P.

However, no sooner had these "radical" reforms been announced than they were exposed as ill-thought out and full of flaws. Among Blair's most vocal critics was Frank Field, a former pension secretary whom he had sacked for arguing for a better deal for pensioners. Field showed, for instance, that, on the basis of the government's own figures, many working class pensioners would get no additional pension despite contributing all their lives to one of Blair's stakeholder schemes. This forced a red-faced Gordon Brown to introduce this year's Pension tax credit, which provides a small tax incentive to pensioners on low income who have small personal savings.

In any case, in the short term, but even more so in the long term, pensioners' conditions have been significantly eroded by Blair's policies. The fact, for instance that 49 years' worth of contributions are required to get the full amount of S2P (as opposed to 20 years for SERPS) means that a lot fewer people will get it in full at retirement age - all the more so as no S2P contributions are paid while workers are unemployed, sick or on maternity leave. Already it is estimated that the present combination of state pensions only gives the average pensioner 25% of average earnings. And the introduction of S2P can only push this figure further down. As to Blair's aim to reduce pensioners' dependence on state charity, it is a farce. According to the Pension Provisions Group, a body of experts appointed by the government itself, its policies will result in the proportion of pensioners relying on means-tested benefit reaching 57% this year, as opposed to 39% in 1997!

But then, of course, what does it matter to this government if its reforms are flawed, bureaucratic, nightmarish, let alone deeply unfair to present and future working class pensioners. For Blair, just as for Thatcher, only two issues really matter with regard to the pension system: that its cost to the state and to the bosses should be reduced, and that the largest possible share of workers' pension savings should be channelled towards the big City firms.

Will history repeats itself as farce or tragedy?

The dangers attached to entrusting the City with workers' pensions were illustrated by the pension mis-selling scandal of the 1990s. The Tories' 1986 Pensions Act was followed by a huge campaign in support of personal pensions. Workers were encouraged to opt out of SERPS or out of their occupational pensions and to take up personal pensions. In addition to a rebate on their NI contributions, which would be paid directly by the state into their new pensions for several years, they were offered 3% of their wages as an incentive and all this was tax free. At the same time pensions salesmen were offering what seemed to be huge bonuses, usually in the form of a lump sum, which, given the difficulties of the times, was particularly attractive for the low-paid. By 1993, as a result, five million people had opted either out of SERPS or an occupational scheme - ten times more than had been planned for by the Tory government.

Among those who had opted out, 1.5 million were low-paid workers who soon found out that they had been conned. Transfer and handling fees had used up most, or all, of the savings they were counting on. And administrative fees were eating up the small contributions they could afford - in short, they were doomed to contribute all their lives to a second pension which might give them hardly a penny's worth in return.

Thus began the biggest insurance and banking scandal ever. This forced the Tory government to open a public enquiry in 1994 and pensions salesmen were blamed for the mess. But who had written the small print into the pension contracts and paid huge commission to salesmen if not the pension providers? And who had orchestrated the media campaign in support of personal pensions, if not the government?

In the face of the scandal, the government and the insurance giants set up a compensation fund. To date thousands of mis-selling cases have still to be settled. The total compensation paid to the 1.5m who had been misled into buying these personal plans has been estimated at £14bn, of which £4bn at least came out of public funds. This should be added to about £15bn paid by the Treasury in tax incentives to boost the opt-outs between 1987 and 1993. In total, therefore, despite the compensation scheme, the finance industry still managed to make a comfortable profit out of robbing the low-paid!

Given this background, Blair has been going out of his way to try to convince workers that his stakeholders' pension would not be a repetition of the Tories' mis-selling scandal. But is that so?

Stakeholder pensions are supposed to be "cheap" schemes, in the sense that contributions can be as low as £20/month and administrative costs are supposed to be "at most 1% a year". But 1% of what? In reality, it is 1% of the total pension pot - which is not a lot at the beginning, but becomes quite substantial after a few years. According to calculations made by the National Pensioners' Convention, this means that, at current rates, the pension provider will pocket 25% of all the contributions paid over a normal working life!

As to offering any sort of security to future pensioners, the stakeholder pensions certainly do not. A sharp drop in share prices on the stock market could potentially reduce drastically the value of such pensions. And even if this does not happen, when the time comes to convert the pension pot into an annuity at retirement age, low interest rates may well result in a very low pension, not to mention the fees paid to buy the annuity. In fact, the only thing that is guaranteed is the regular cut that the finance sharks will be able to award themselves year after year, regardless of the ups and downs of the market.

Many of those targeted by stakeholder pensions will be unable to measure the risks involved. Not only do the new pension rules explicitly protect pension providers from the obligation of having to spell out these risks to potential buyers, but they give these companies immunity against any court action on this account. This is a recipe for a re-run of the pension "mis-selling" scandal, except that this time the mis-selling is endorsed in advance by the government itself.

Of course, the government claims that pensioners' interests will be protected by its appointed regulatory body. But ironically, this same body has been unable to prevent its own employees' occupational fund (not to mention that of the House of Commons) from losing out as a result of the collapse of Equitable Life - Britain's oldest insurance company - following the sudden fall of the stock market, in 2000. Yet Equitable Life was clearly in breach of regulations when it decided to freeze the funds of most of its policy holders in order to pay the guaranteed returns it owed to a small minority of better-off customers.

No wonder the take-up rate of stakeholder pensions has been very poor so far, despite the government's huge advertising campaign supported by the finance industry, supermarket chains, the Post Office and even some of the largest trade unions whose leaders have set up their own schemes. Those who are targeted by Blair's campaign are earners in the £10,000-20,000 income band. This is no coincidence, as over 75% of these workers are also SERPS members. By trying to lure them into taking one of his stakeholder's scheme, and therefore opting out of SERPS, Blair is clearly hoping to speed up its phasing out. Luckily these workers do not seem to have bought Blair's salesmanship.

The "pension" industry and state subsidies

There is something of a legend behind the so-called "pension" industry - namely, that it is entirely devoted to providing for retirement. In fact the figures tell a very different story.

In the year 2000, the various funds categorised as pension funds managed £850bn in Britain. But the ten largest occupational funds accounted for only £170bn of this amount and the others, mostly much smaller funds, certainly do not make up the rest of this total. The discrepancy is due to the fact that the so-called pension industry is actually used by the well off to make tax-free investments which have nothing to do with retirement funds.

The resulting tax loss to the Treasury - or disguised subsidy depending on how one looks at it - is enormous. Last year it was in the region of £20bn, most of which goes, not to help future pensioners but to feather the tax-free nests of the wealthy and pay the fees of finance institutions. In fact, according to the government's own figures, for every pound of so-called "pension" tax rebate, 25p goes to the richest 2.5% taxpayers, another 25p goes to the next 7.5% richest, and 50p to the remaining 90% taxpayers!

Astronomical figures have been surfacing repeatedly in the papers about the pension contributions paid by companies on behalf of directors. Last May, for instance, it was revealed that Sir Geoff Mulcahy, who had just resigned from the top job at Kingfisher, left with a pension pot of £15.2m, which should give him a so-called "pension" worth £15,800 a week! Except that, of course, this poor man who has already a large fortune does not need this to take care of his old age. For him it is just another investment. And it is not just private companies which offer such golden handshakes. Blair's government does too, at least for some of its members, like Lord Irvine, the Lord Chancellor, who left his office with a £2m pension package after only a relatively short time. The fact is that both for companies and for the fat cats, paying large amounts in the form of pension packages is much more effective tax-wise than paying the same amount in the form of salaries. It is just a way for companies to redistribute profits to the capitalists, tax free!

This makes the charade around Brown's latest tax measures on pensions all the more preposterous, particularly in view of the degradation experienced by most working class pensioners in their standard of living. This charade is presented as a polemic between Brown and Blair over the point above which tax should be owed on a pension pot, as a refund for the tax relief earned in the past. Brown wants a £1.4m limit while Blair wants it to be at least £1.8m. Of course, companies are vocally siding with Blair. Yet a £1.4m pension pot buys a pension worth around £1,400/week. And at that level, surely, the beneficiary could afford to pay some tax at least. However two of Brown's measures are not subject to controversy. One raises the limit of the amount that can be saved in a pension scheme and deducted from earnings for tax purposes to £200,000 a year - 13 times the annual wage of a postal worker! And the other allows those lucky enough to have a pension pot above £1.4m to keep the excess as a lump sum without turning it into an annuity. This simply amounts to legalising the capitalists' practice of using pensions as a tax dodge to conceal profitable investment.

When it comes to the rich, this government does not show nearly the same determination to reduce their dependence on state subsidies as they do for the working class!

The false security of occupational schemes

Despite what union leaders have always argued, occupational funds never provided more security to workers' pensions. And today, the chickens are coming home to roost in this respect.

The problem goes as far back as the 1990s, in fact. On the strength of the stock market and due to dubious ways of assessing future liabilities, large companies began to build what they called a "surplus" in their occupational funds. Thatcher had introduced rules which, under the cover of protecting funds from possible deficits, also legalised the creaming off of these surpluses. This could be achieved either by improving pension provisions or reducing employees' or employers' contributions, or a combination of all these elements. Often companies negotiated with the trustees to have a lump sum in addition to a contribution holiday in return for concessions for pensioners and/or employees. Since employers' contributions were deferred wages, a contribution holiday amounted to a wage cut. And bosses got into the habit of paying lower wages and even using their employees' pension fund as a cash reserve.

There were some scandals, like Maxwell's and less notorious ones at Lucas and Imperial Tobacco, in which companies went so far in using this cash reserve that they left nothing for pensioners. This led to the 1995 Pensions Act which outlined regulations to protect pension assets and set up an occupational scheme regulator, OPRA. But it was given only very limited powers. It could fine trustees but not the companies sponsoring the schemes. Besides, as OPRA's board was entirely dominated by representatives of the pension industry, it was remarkably inefficient at putting pressure on fund managers. Likewise, fund members were allowed to take out private law suits against trustees, but the law shielded companies and fund managers from any criminal procedure. As to companies, they were only subject to a voluntary code of conduct. And in so far as implementing this code implied additional costs, they simply ignored it.

The sharp fall of the stock-market, in 2000, created a new trend. Many occupational funds, which had been mostly invested in shares, found themselves with large deficits. Of course, the fund managers who had been managing them took no responsibility. They just took their fees as usual. Since most of the companies concerned had taken contribution holidays for the best part of the previous decade, these deficits would easily have been plugged by putting in their unpaid contributions. But there was never any question of that. Instead they began to cut their employees' pension provisions. Final salary schemes, which provided pensions linked to workers' wages, were closed to new entrants, converted to schemes providing no guaranteed pensions to workers or closed altogether. Often workers' contributions were increased while the employers' contributions remained at the same level, when they were not cut.

The precarious nature of occupational schemes was further highlighted recently by the cases of a series of companies which filed for bankruptcy, partly at least to avoid having to honour part or all of their pension liabilities. This was the case, in particular, at ASW and United Engineering Forging - both formerly part of British Steel. In both cases, workers who had been employed sometimes for decades found themselves with the prospect of taking a 60 or 70% cut, in the best of case, in their pensions when they retire. Blair has promised to legislate so that existing employees get the same treatment as pensioners. But even in that case, they will still only be paid after any bank or supplier owed money by the bankrupt company - including if this company finds a buyer and resumes its activities as a different concern.

So, after having raided their employees' pension funds, under the pretext of an artificial surplus due to the stock market boom, companies have raided these funds a second time, under the pretext that they were experiencing difficulties because this boom had come to an end, or for whatever other reason. In both cases, workers have taken a cut in their real wages - which will duly have to be taken back.

Fighting attacks on pensions

As was shown earlier, the demographic argument which says that society can no longer afford to cater for its senior members unless drastic measures such as cutting pensions or raising retirement age are taken, is fraudulent.

This fraud becomes all the more blatant when considering the National Insurance budget. According to the Government Actuary, the de-linking of the Basic State Pension from earnings in 1980 has saved the budget an average of £10bn spending per year since then. In other words over £200bn in today's terms have been stolen from pensioners over the past two decades. What is more, on top of these savings, Blair's government has been running a surplus on the National Insurance budget ever since 1998. Today, this surplus reaches £8bn a year - which will, no doubt, be lost in the funding of Blair's military venture in Iraq or some other subsidy to the capitalist class.

Pensioners organisations have every right, therefore, to demand that the Basic State Pension should be re-linked to average earnings and restored to the value it would have today on this basis - i.e. £105/w for a single pensioner, which would still be far from subsistence level. Besides this would not cost much, since this would be only £5 above the level set for the Minimum Income Guarantee by Brown. But, by the same token, it would end the humiliating and bureaucratic means-testing procedure faced by most poor pensioners.

But more generally, it is the entire pension system which needs to be rebuilt - not as a function of the predatory appetite of the City bankers or company bosses, but in order to provide a decent living for those who have spent their lives creating wealth for society as a whole only to find themselves pushed to the sidelines of society as soon as they are no longer considered profitable, once they reach retirement age.

The present system, as it stands, is irrationally chaotic, reflecting the cost-cutting exercises of successive governments, the attempts by each individual company to impose its own law on its workers and the parasitism of the financial sector. When workers reach retirement age today, they probably have some entitlement to Macmillan's pension, some to SERPS, possibly some to S2P, not to mention deferred entitlement to various occupational funds - sponsored by companies which may have disappeared - plus, of course, their entitlement to the Basic State Pension. In short, they are faced with an administrative nightmare which feeds an army of so-called "pension experts" who make a packet out of workers' predicament.

This is intolerable. Just as it is intolerable that the wealthy should be allowed to masquerade as would-be pensioners in order to benefit from enormous state subsidies. They already pay ridiculously low taxes on their huge incomes and no tax on their wealth. They should be prevented from milking public funds on top of that.

Intolerable too, is the fact that on retirement, many workers have to surrender a substantial part of their savings to insurance companies in order to buy the annuity that will give them their pension - assuming that their pension pot has not been reduced to nothing in the meantime by the ups and downs of the stock market or the bankruptcy of their employer.

A rational and effective way to provide decent pensions to all retired workers can only be one based on a unified system providing a single type of pension financed primarily by taxing capitalist profits and the wealth of the rich - because this wealth and profit only exists because of the accumulated value created by workers, including those who are now in retirement. There is indeed something obscene about demanding from workers that they should pay for their pensions out of their wages, when these wages represent barely what they need to make a living.

This should be an objective for the future struggles of the working class - not just for pensioners' organisations, but for the working class movement as a whole. Because, in the final analysis, the condition of senior citizens in any society is a reflection of that society's real degree of civilisation.