Over the last few years, there has been a trend of companies altering their pension schemes from final salary schemes to the less beneficial and far riskier — to the pensioner — money purchase schemes. It's a trend that has been fought where possible by trade unions, mostly with little success. The willingness to fight to save final salary schemes has been undermined by the almost endless stream of horror stories about schemes becoming intolerably costly for the poor employer or going bust when the firm folds, leaving pensioners in the lurch. The Royal Mail and the BT pension schemes are frequently quoted as in dire trouble because of various "black holes," resulting in massive deficits. The Royal Mail scheme has even been pilloried as the biggest obstacle to the firm's viability. All this has served to militate against working people springing to the defence of their pension schemes. What was once known as invisible earnings, a right generated by years of contributions and service, has become mutable, a privilege granted by a boss and taken away at a whim.
But pensions more nearly relate to energy prices than to any commercial reality. We've all seen how energy prices rise when the poor, struggling energy companies have to face higher raw materials bills, but rarely go down when prices drop. It's the same with occupational pensions. When the markets clamp down, the bosses wail and rend their clothing over having to increase their contributions to final salary schemes because the assets of the schemes aren't generating enough income. But when the markets go up, there's precious little rending of the Armani suits and there's equally little chance of the boss ploughing more into the schemes to provide against the lean times. Instead, they take a contributions holiday, bung nothing at all into the schemes, often for years, relying on market gains to keep the funds up to scratch. They probably give themselves juicy bonuses as well, on the basis that the firm's net profit soared.Oddly, we're in one of those periods now, whatever the government, the opposition and the rest of the Establishment may say about soaring debt.
The government's Pension Protection Fund, which was set up to safeguard at least some occupational pensions against fund defaults, has just said, although you might struggle to find it in the tame capitalist press, that pension funds have had a bumper year. The overall deficit was reduced from £51.9bn at the end of January to £15.1bn at the end of February. And that stacks up with other improvements to rank with the nearly miraculous. At the end of February 2009, the deficit stood at £204.7bn. The improvement was driven by a 2.5 per cent jump in the value of assets held by pensions during the month due to rising equity markets.
But, strain as you might, you won't hear any companies rushing to reinstate their final salary schemes. No, they've had their chance to chop the schemes when times were hard and they won't reverse things now.
Listen carefully and you'll probably find that the problems were down to "market fluctuations" rather than pension holidays and the present improvement will be described as a "blip" not to be relied on.
But so much of these figures are just pure fantasy. A change in actuarial assumptions in 2009 reduced funds' estimated liabilities by around £70bn. The pension funds didn't own a single share more, but were supposedly and suddenly £70bn better off. There can be no substitute for a proper state pension, but while occupational pensions are there, and have been hard-won by working people, they mustn't be left to the mercies of unscrupulous profiteers. Pensions of whatever kind can't be just grist to the market mill, mere capital available for speculation. It's not the markets' money, it's the pensioners'.