Andy Burnham plans to remove the automatic annual link between the state pension and earnings. The change would allow less generous increases, while workers are advised to make up for inadequate retirement provision by saving more. The employers who’ve profited from their labour for decades scarcely enter the discussion.
Since 2011, the triple lock has increased the state pension by whichever is highest: inflation, earnings growth or 2.5 percent. Burnham’s proposed replacement would retain the inflation and 2.5 percent guarantees, with pensions tracking earnings over the longer term. The annual protection against falling behind wages would go.
Pensions have risen faster than earnings under the triple lock. Using that comparison to justify smaller pension increases recruits the underpaid worker as a witness against the retired worker, as though the remedy for poor wages were a poorer retirement. A pension cut won’t put a penny on anyone’s hourly rate. It will, however, reduce what today’s workers can expect when their own working lives end.
And what has the triple lock produced? Pensioner poverty has increased slightly over the past decade once housing costs are taken into account. Pensioners are still less likely to be in relative poverty than working-age people or families with children. But the deprivation of one section of the working class is a wretched argument for reducing the income of another.
Nor does reaching pension age abolish class. A landlord collecting rent and a former shop worker dependent on the state pension appear in the same age bracket. The landlord’s income comes from ownership; the former worker has exhausted a lifetime selling their labour. Arguments about whether pensioners have too much obscure precisely this distinction.
The international comparisons hardly suggest that British workers are being promised a lavish retirement. In the OECD’s model for average earners born around 2000, using pension arrangements in place in 2022, the UK state pension and automatically enrolled workplace provision together would replace 54.2 percent of earnings after tax. The average across wealthy countries is 63.2 percent.
Including additional occupational and personal pensions narrows the gap. There’s the catch. A national average improved by people with substantial additional provision offers little comfort to somebody relying on the state pension. Their rent and heating bills aren’t paid out of somebody else’s pension pot.
The case for restraint comes armed with a formidable figure: annual spending on the state pension is set to exceed £150bn. Yet Britain spends a smaller share of its economy on total retirement benefits than the wealthy-country average. The sum sounds enormous when recited on its own. Measured against the wealth of the country, the claim that pension provision has become extravagantly generous looks rather less convincing.
Britain’s spending on universal healthcare is no justification for holding down pensions. Why should workers have to choose between treatment when they’re ill and a secure income when they’re old? The division of wealth between wages and profits, the income drawn from property, and the resources devoted to sustaining Britain’s imperialist power all belong in the reckoning. There’s no reason to begin and end the accounting with competing claims on public services.
Debt interest already absorbs £1 in every £13 of government spending. Higher pensions financed through additional borrowing would increase that bill, so holding down pension spending offers a way to limit future debt costs. But the state can also raise revenue from profits and property income. Choosing to squeeze pensions instead places the burden on retired workers while protecting the income of the owning class.
An ageing population does create real obligations. More people need food, housing, healthcare and care after leaving employment. Meeting those needs depends on productive capacity and the organisation of labour. Treating capitalist profits and property as untouchable, then declaring pensions unaffordable, settles the class question before the arithmetic begins.
Private provision offers capital a particularly convenient arrangement. Workers put aside part of their wages, employers contribute, and financial institutions invest the accumulated funds for returns. In an imperialist financial centre such as Britain, retirement provision is thereby tied to the pursuit of profit from labour at home and abroad. Workers’ future security becomes bound up with the success of capital. A claim on a pension fund doesn’t put the enterprises it finances under working-class control.
Automatic enrolment can bring more workers into pension schemes. It can’t give a poorly paid worker the saving power of somebody on a high salary. Housing costs still have to be met before money can be put aside. Making private provision more widespread carries these inequalities into retirement.
The consequences are especially stark for women. Across wealthy countries, the typical gender pension gap is around 22.8%. In Britain, women’s pension incomes are roughly a third below men’s, according to the OECD’s latest available UK figures, which date from 2021. Lower pay, periods outside paid employment and part-time work leave smaller pension pots.
These working lives don’t arise independently of the needs of capital. Children must be raised, sick relatives looked after and households maintained. Patriarchy places a disproportionate share of this work on women, while employers benefit from labour sustained by care they don’t bear the full cost of providing.
A woman who reduces her paid hours to care for a relative can lose pension contributions year after year. The care still has to be done. Capitalism gets it done cheaply, then hands her a smaller pension. Praising private provision as the advanced solution means praising a system that carries this penalty into old age.
Under socialism, the working class would control the wealth it produces and plan provision for retirement as a social responsibility. Public care services would take on work now pushed into households, and security in old age wouldn’t depend on how much each worker had managed to accumulate in a private fund. Such a change requires a struggle over ownership and state power. No amount of advice about personal saving can substitute for it.
Private provision leaves workers to make up the shortfall by saving more.
If you can! After the low wages, after the rent, after the years of unpaid care. A system that leaves retirement security dependent on money workers can’t spare has no business lecturing them about foresight.
