date: Sep 7 2002 embargo: noon Sep 8 2002

Attention: industrial, political, personal finance

Today's workforce face poverty in retirement

Speaking at a press conference in Blackpool on the eve of the TUC Congress, TUC General Secretary John Monks said:

'For more than fifty years we have believed in progress - that living standards would rise, that the country would become more prosperous and life would gradually get easier. Not true for every individual of course, but the trend has always been upwards.

'But many people at work at work today will be poorer when they retire than today’s pensioners. Many more will rely on means tested benefits that depend on the generosity of the government of the day. Progress for the retired has come to a full stop, and for many is now going backwards.

'That is why top of today’s trade union agenda is Britain’s growing pensions crisis. Both employers and the state are trying to load responsibility for saving for retirement more and more on to individual employees. But employees don’t know about their existing pension arrangements, are ignorant of how much they need to save and cannot afford the vast sums required.

'Employers are cutting final salary schemes and paying less into replacement schemes. The numbers with access to any occupational pension is falling. But at the same time both major parties say their aim is to reduce the state contribution to average pensioner income from 60 per cent to 40 per cent.

'Today we show that the two types of pension that are meant to replace final salary schemes will lead to poverty in retirement for many. This is not because the schemes are inherently bad, but because employers are not putting enough into them and employees cannot afford to make up for the employer shortfall.

'Firstly we show that those relying on employer-sponsored stakeholder pensions are on average £3,000 a year short of the contributions they would need for a decent pension of around half average salary when they retire. Employers are on average contributing just 1.25% of wages to stakeholders. Experts say everyone needs to save about 15% of their salary all their working lives to meet this pension target. But average employee and employer contributions to stake holder are just £44 a month - around £250 short of what is needed for someone on the average UK salary.

'But even this estimate of what is needed is based on the dubious assumption that everyone at work starts making pension arrangements from their first job - hardly likely in this era of student debt and sky high property prices in much of the country.

'Our second analysis is of the typical kind of defined contribution pension scheme that employers are providing in place of final salary schemes. We find that employees will only get a decent pension of half their salary if they join in their early twenties, pay in every year and don’t retire until they are 65.

'If you only join such a scheme when you are 40 you need to pay more in than the law allows to get a decent pension. Typical employee and employer contributions would give a 40 year old just joining such a pension just of 18% of salary at age 60 or 26% at 65.

'These are two more reasons why pensions are top of the union agenda. The cuts in final salary schemes are the first serious attempt to cut wages and conditions since the second world war. Increasing numbers don’t have access to any pension with an employer contribution.

'Some people like to divide the trade unions into moderates and militants. Let me tell you we are all militants when it comes to defending and advancing pension rights. Even decent employers have betrayed decades of trust as they give in to city pressure to scrap quality pensions. Corporate Britain, with some notable exceptions, should be hanging its heads in shame.

'The only solution is a new partnership for pensions between government, employers and employees. Government must restore the earnings link to the state retirement pension to provide a sure foundation for everyone’s retirement. Employers must be made to contribute to their employee’s pensions and should regain the right to make joining a pension scheme a condition of employment.'

Notes to Editors:

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Contacts:

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Press release (800 words) issued 8 Sep 2002