"Pensions Crisis: A Failure of Public Policymaking”

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A new publication "Pensions Crisis: A Failure of Public Policymaking” (ISBN 1-902384-10-5) by Austin Mitchell MP and Professor Prem Sikka (University of Essex) argues that the UK government proposals for pension reforms will fail because they pay no attention to the deep inequalities in the distribution of income and wealth. Government statistics show that 50% of all workers have a gross annual wage of less than £23,600 and 70% earn less than £29,000. 50% of people own only 1% of the wealth. These inequalities make it impossible for ordinary people to make provision for their own pensions.

The monograph argues that companies are using the pensions crisis to dump costs on to society and employees. Whilst company executives enjoy gold-plated pensions good occupational pension schemes for employees are being closed or diluted. Through a variety of mis-selling scandals the finance industry has also looted people’s savings. There is an urgent need for tougher regulation and enforcement.

The monograph also debunks some of the myths about pension scheme deficits. It questions the significance of the accounting numbers that are routinely cited in the press.

The present UK state pension is one of the lowest in the western world. In the league of 30 OECD countries Britain is ranked 26th.

• the state pension should be immediately raised to £114 per week for single pensioners and for £175 per week for couples and linked to the rise in earnings. The target should be to fix the state pension at 60% of median earnings.

• Improved state pension should be funded by cracking down on tax avoidance. Britain is losing tax revenues of between £97 billion and £150 billion each year.
  

• 65,000 rich people taking advantage of the archaic residence and domicile laws should be subjected to the same tax rules as ordinary people and pay income tax. 

• Those earning more than £100,000 should pay income tax at the marginal rate of 50%.

• The upper limit of the national insurance contributions should be increased to raise extra revenue.  Currently, someone on £20,000 annual wage can expect to pay 8.25% of their wage in national insurance contributions compared to 9.1% for £30,000 wage, but due to an artificial ceiling someone on £100,000 wage only averages at 3.1%, and a person on £300,000 pays around 1%. 

• Higher income earners should not continue to receive 40% savings on private pension contributions.

• A modest Tobin Tax should be levied on all stock market activity to finance good pensions.
  

• The average profitability of non-financial UK sector is at a record high of 14.7%, with the services sector achieving 20.1% and oil and gas sector at 38.7%. Despite record profits British companies pay too little to fund decent pensions. The employers’ national insurance contributions should be increased. Currently, they form about 9.6% of the UK labour cost compared to an average of 15.2% for the OECD countries and 17.8% for the EU.
  

• Companies should be forbidden from taking ‘pensions holidays’.
  

• When companies issue free shares and share options to company executives they should be required to issue them to pension schemes

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