PAUL WILENIUS: Not only has morning broken
for Alison Parr, so have her dreams of a comfortable retirement. Her husband
Andrew has spent a lifetime at the Allied Steel and Wire plant topping
up his pension. Now the firm in Sheerness has gone into receivership and
his union's worried that their pension fund could be virtually empty.
MICHAEL LEAHY: Where pensions are under
threat, where our members for instance have paid in thirty years and those
pensions are under threat, if individuals are going to have confidence
for the future, then the government has to step in and guarantee those
WILENIUS: For almost thirty years
Andrew Parr has worked in this steelworks saving for his future, only to
see the company collapse and his entire pension threatened. Millions of
people - young and old - now fear the same thing could happen to them.
Ministers are so alarmed they're rushing through new proposals to try
to tackle the crisis within weeks.
Pensions have now jumped
to the top of the political agenda. Many companies are rushing to close
down their superior final salary schemes, which guarantee a pension linked
to pay and replace them with inferior pensions linked to the value of the
troubled Stock Market . Sixty per cent of companies' final salary pension
schemes are now closed to new members. And there are 1.6 million fewer
people with any form of occupational pension at all, than ten years ago.
While the Stock market has fallen by forty per cent since the end of 1999,
dramatically reducing the value of pension funds.
FRANK FIELD MP: We are on the verge, I
believe, of seeing a pensions meltdown, what the government has to do is
not wring its hands and turn and face the corner but to say what major
reforms can we bring forward which not only achieve some of our other long
term objectives such as abolishing pensioner poverty, but do so in a way
which immediately begins to lift the pressure off those schemes which might
otherwise go to the wall.
WILENIUS: Andrew Parr's not the
sort of man to give up without a fight. He's on his way from his home
on the Kent coast to take his case to the heart of government and to tell
Ministers they have to act now.
STEVE WEBB MP: People often talk about
a time bomb in pensions and normally they think about paying for pensions
in years to come and that they'll all be unaffordable, but the real time
bomb is the fact that many people now of working age are heading for poverty
in old age and that's a problem that's got much worse in the last five
years and is set to get much worse in the next five years.
WILENIUS: Selling pensions have
been the job of the men and women from the Pru for 150 years. Here in
the City last week, union reps were knocking on the door of their bosses
to save their own pensions scheme. The Prudential is following ICI, British
Airways, Sainsbury's and many others who've closed their final salary schemes.
Their anger is shared by the rest of the union movement.
JOHN MONKS: I'm not one of those who preaches
that strikes are a good thing but on protecting pensions I'm very much
a militant, count me in on that particular thing. I think the boardrooms
of Britain have got to wake up to the fact that many of them are lining
their own pockets quite generously as far as their own pension schemes
are concerned and at the same time cutting back on staff pension schemes.
Well that is such hypocrisy that everybody notices and it's fuelling a
new militancy in Britain at the moment, it's probably one of the biggest
causes of militancy in Britain at the moment.
MICHAEL LEAHY: There will be a big political
price if the government don't act on pensions. A moderate union like ourselves
who don't take industrial action lightly, have necessitated to take industrial
action in protection of our members' interests. Now we don't want to do
that. We shouldn't have to do that. Our members should be protected because
it undermines the stability of the industry. But we will continue to do
it and if the government don't legislate there will be an enormous political
price that will be paid by this government and any future government.
WILENIUS: There was no resolution
during the two hour meeting as company bosses were forced to listen to
the growing concerns of the unions. And as a last resort the union is prepared
ROGER LYONS: Well I think we have made
it very clear to the board and they understand that they've attempted to
make changes to the pensions without proper consultation. They are now
absolutely committed to having proper consultations with us so we can look
at all the options that our members want today and in the future.
WILENIUS: And last week the final
salary pensions stampede continued when another leading pension company
announced it was closing its scheme to new members.
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WILENIUS: It's now so serious,
the government's critics want next month's Green Paper on pensions to outline
radical measures to rescue the whole pensions system. And they want them
introduced swiftly, as it's now facing a real disaster.
WEBB: It's almost too late already,
most major companies have now closed their final salary pension schemes
to people who start working for them, now that will take a long time to
work through into retirement but that very good form of pension provision
which many of the best off people in retirement that's what they're living
on is not something that their children and grandchildren will see.
DAVID WILLETTS MP: This is the biggest crisis in
funded pensions since the war. What it means is millions of people are
going to retire with an income way below what they've been hoping and expecting,
and we can already see its effects amongst the recently retired, people
who have retired in the last few years a smaller number have an occupational
pension than would have done ten or twenty years ago.
WILENIUS: One of the ways the government
might try to help people like Andrew Parr in future is by simplifying the
tax system covering pensions. However, it's already been attacked for
increasing the tax burden on pensions. In their first Budget they imposed
tax changes which put five billion pounds a year tax on pension funds.
Overall that amounts to approximately twenty-five billion pounds under
this Labour government. Even a former new Labour Minister thinks this
was a big mistake.
FIELD: It's a wonderful wheeze
for those who think they can make X million pounds quotes for the Exchequer
but it actually pushes pension reform in the wrong direction. It's already
been going in the wrong direction for long enough, it's about time the
government got on side of taxpayers and supported decent people who want
to save for their own retirement to be able to do so without being clobbered
around the ears for doing that simple, but very important act.
WILENIUS: Another key obstacle
hampering the running of effective pensions schemes, is the sheer weight
of red tape and bureaucracy imposed by the government. An independent
study showed that there are thirteen hundred pages of tax regulations,
which are creating huge frustrations for many businesses.
WILLETTS: One problem is the burden
of regulation, there's just too much hassle running a pension fund now
and many companies can't spare the staff or it can't afford the cost of
doing so. So we worked with Alan Pickering who was commissioned by the
government to look at how you could cut back on the red tape and of course
the tax rules are terribly complicated, over a thousand pages of tax rules
on pension funds when a generation ago there was fewer than fifty pages,
so there has to be a big reduction in the sheer administrative burden of
running a fund.
WEBB: There is a case for simplifying
the regulation that there was a knee jerk reaction to the Maxwell scandal
and arguably it went too far in the other direction so that funds that
are basically solvent are basically okay are nonetheless facing more of
a squeeze than they need to. So there are things at the margins that would
help. They could change the tax rules about retirement so that people
can draw a bit of company pension and go on working for their old employer
which would be entirely a good thing, but none of these changes are going
to make companies want to turn the clock back. None of these changes are
going to make an employer want to put hundreds of millions of pounds into
the pension scheme when by switching the nature of that scheme to a money
purchase scheme, where they just put in what they want to, they get rid
of that obligation.
WILENIUS: When he arrived in Whitehall,
Andrew Parr and other pension victims were ushered into a meeting with
officials and Ministers. On The Record has learned that some Ministers
are now thinking of taking the controversial step of using compulsion,
to force companies and individuals to save for their retirement, even though
it will spark off opposition.
WILLETTS: I personally am wary
of compulsion, partly just on principle, I think, we're grown ups and I
think there's too much compulsion in this country, I want people to be
free to run their own affairs.
WILENIUS: Many others say that
compulsion is the only serious way of saving pensions, as we've come to
know them in Britain, over the last century.
FIELD: We're at the same stage
now on pension reform as we were in the First World War where the government
found that if it relied on people volunteering their services to fight
the war we were going to lose. Similarly if we continue to rely on a voluntary
system of people saving for retirement the war against poverty and old
age will similarly be lost and therefore the crunch issue for the government
is whether it's going to move from a voluntary system of savings to one
WEBB: The single most important
thing that the Green Paper could do to sort out this problem for the long
term is make it compulsory for employers when they take somebody on to
put money into a pension scheme for their employee. We expect employers
to pay four weeks paid holiday when they take somebody on, it should be
compulsory that they put some money into an employee's pension scheme whether
they run it or not so that then everybody is covered and the government
just doesn't leave it and hope people save and hope that companies will
WILENIUS: Inside the Department
for Work and Pensions, Ministers are finalising proposals to try to save
the pensions of millions of people. There are worries inside Tony Blair's
government that if they go for compulsion, it could prove unpopular with
business and many voters. But some Ministers feel if they don't take this
dramatic step now, it could condemn present and future generations to a
life of poverty in old age.
MONKS: I'm sure there are people
in the government who think that compulsion is the only way forward, of
course there are others who say well listen to the CBI. That's a battle
that's going on I know in the government at the moment and so we're very
much backing those who say to employers keep up your sense of obligation
and don't run away from it and if necessary we'll make you fulfil the obligations
which you freely entered into in the past.
WILENIUS: Andrew Parr's driving
back from his meeting with Ministers, but his problems - along with millions
of others - remain. Critics say that the government must put pensions
back on the right road, or face the political consequences.
FIELD: If we meander around and
waste the opportunity in this Green Paper, it's not impossible that by
the end of not this year but next year, the electorate for some reason
or other has forgiven the opposition for past behaviour and there's a real
fight then about the next General Election. If we don't lay the plans
now and begin to convince the electorate we're going to deliver on the
first phase of those plans before the next election, many of us may find
it very, very difficult to get back into the House of Commons after the
LEAHY: They must act and if they
don't act on this issue, which is an issue which is the top of everyone's
agenda, then this could be as damaging to them as the Poll Tax was to Margaret
WILENIUS: This powerful warning
from the union leader fighting for a comfortable retirement for the Parr
family, shows how high the political stakes are. On The Record has learned
that Ministers are even considering setting up a Royal Commission to try
to sort out the pensions mess. It's not an issue they can delay or fudge,
say critics. To ensure that today's workers have something to look forward
to when they retire, the Labour Government will have to take those tough