through paying the money out of the returns generated by investment managed by pension funds, as in Britain and the USA. The other is to socialise the process to some degree, by funding pensions through taxation - as in Continental Europe.
In both cases pension payments do not simply result from bargaining between workers and employers: either the state or the financial services industry will also be involved in provision. Also, since the deferred wages represented by pensions are paid from an uncertain surplus to be generated in the future, there is always a high degree of risk involved in paying them.
The second big difference between pensions and the rest of wages is that there is strong political pressure for pensions to be made available to everyone, not just those who have had continuous paid employment through their working lives.
This has forced capital to accept a measure of state involvement in pension provision even in the investment based UK system, expressed through the state pension. But there have been continuing struggles over the level of the state pension and over the taxation needed to fund it.
For these reasons the value of pensions results from the strategies of employers, the state and the financial services providers. Each of these has an interest in forcing down the level of the payments made to workers.
But in addition they have fought amongst themselves over who should bear the costs of the payments that remain. The current national and international pensions crisis results from both of these levels of struggle.
The free market myth is that the crisis is a result of people living longer. But this is not true.
Even the figures put forward by the European Financial Services Round Table indicate that the proportion of European output needed to finance state penscheme. A few companies have wound up their pension schemes altogether. However, this approach has apparently not been widely adopted because so many schemes cannot even meet the legal minimum funding requirement required to close a pension scheme down!
Honda is proposing to raise the retirement age from 60 to 62 to close the deficit on its scheme and closing its scheme to new members.
The response of New Labour to what is effectively a dramatic series of wage cuts has been predictable -total capitulation. The Green Paper makes some concessions on the tax treatment of workers' savings for retirement and talks about encouraging people to retire later. The government sponsored Pickering report essentially suggests that if the benefits promised by final salary schemes are revised downwards, then employers might be persuaded not to wind them up. None of these suggestions will make any significant inroads on the problem.
The crisis is not limited to Britain but affects any country where pension provision depends on stock market returns. Such schemes in the USA now face. up to a $300 billion shortfall. Internationally, pension fund deficits have contributed to declines in the credit ratings of companies such as Deutsche Telekom, Ford, General Motors, Thyssen Krupp, BAE Systems and BASF
What should socialists demand in this situation? in a socialist society there would surely be no difference in principle between the elderly and other members of society; all would receive resources on the basis of need.
Elderty people would probably tend to work less than schemes - effectively the first PFI project of them all, and a predictable disaster.
Workers should have a clear right to shift between company schemes and this state scheme at will with no loss of benefits. The existing state pension needs to be raised in line with earnings, not prices, and above the rate of increase of earnings until the shortfall of the last two decades has been made up. The financial services providers who have helped to create the current crisis, notably the insurance companies, should be nationalised.
Demands over pensions also need to take account of international factors. The British government must stop its campaign to open up the pensions sector in Europe to internationa competition. Also, any idea that Europe's pensions can be funded through increased returns on investments in 'emerging markets' needs to be opposed.
Security for elderly people in the West cannot depend on stepping up the imperialist plunder of the third world. Rather capital in general, and in particular financial capital, which has boomed over the last two decades, must bear the cost.
These suggestions are just a starting point for discus sion. However, such a discussion is now becoming urgent, given the scale of the attacks currently under way.
The issue of pensions is an important element in the fight back against neo-liberalism. It is also a dear indicator of the irrationality of the system as a whole.
Socialists are well placed to argue for a society where an increase in longevity can be seen for the positive development that it is, rather than as an excuse for cutting back provision to the elderty and others in need.
page 20 of the scan
20 socla stre ..... Firefighters' dispute stance April 2003