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    Default It's the 1% who are making Retirement 'Unaffordable'..!

    Don't blame the economy – it's the 1% who are making retirement 'unaffordable'

    Behind the rhetoric of crisis, the demise of the pension era is as much a product of economic ideology as circumstance

    Simon Caulkin
    The Observer, Sunday 22 January 2012


    Jeroen van der Veer, former chief executive of Shell, holds the FTSE 100's largest pension pot, at £21.6m. His company closed its surplus-making pension scheme for employees this year. Photograph: Sarah Lee for the Guardian

    The real pensions scandal isn't the public sector (mean average pension £7,800, median £5,600) but the private. It's not just the shrinking coverage and payouts (just 35% of private-sector employees now participate in an employer-sponsored scheme compared with 80% in the public sector, while according to the National Association of Pension Funds the average lump sum a newcomer will accrue in a company defined-contribution pension is around £20,000, paying out a princely £1,400 year). What really grates is the hypocrisy of employers who, having reneged on their contractual obligations, then – like footballers trying to get opponents sent off – attempt to divert attention from their own behaviour by complaining that the public sector isn't playing the game by refusing to follow them in the race to the bottom.

    Pensions are complicated. Tax and regulatory changes often have unintended consequences, and are complicit in today's ugly mess. What is uncomplicated, however, is that the chief enemy of private sector pensions is not public sector workers, but private sector directors and top executives, who not only are pleasantly cushioned from the retirement hardship they are visiting on their employees, but also – at least indirectly – profit from it.

    As the TUC's Pensionwatch and a report from the High Pay Commission (HPC) make clear, the disparities between the top and the 99% are huge, both quantitatively and qualitatively, and growing. While companies cite a "perfect storm" of economic turmoil and increasingly longevity as justification for closing their gold-standard final-salary or defined-benefit (DB) schemes for the lower orders – Shell's scheme, whose closure was announced three weeks ago, was the last in the FTSE 100 – the officers still travel first class. Most large companies still have DB schemes for at least some directors, whose average pension pot last year was £3.6m. Eloquently, the largest was owned by Shell's former chief executive, Jeroen van der Veer, whose £21.6m will yield a handsome £1.2m a year.

    In the same vein, the 1% accrue their benefits at least twice as fast as the rest of us, and with a normal retirement age of 60 are exempted from the obligation of ordinary mortals to work longer for the general good. The latest wheeze is to compensate directors for tax changes that penalise contributions above a certain level by handing out payments in lieu averaging £138,000 last year – a pay rise by another name, notes HPC chair Deborah Hargreaves, in exactly the same way as slashing contributions is a pay cut in disguise. While huge pension payouts are particularly outrageous when they reward failure, says Mark Goyder, director of the thinktank Tomorrow's Company, pay and pensions make a powerful statement about a company's values. "Surely, as with pay, companies should be obliged to explain the rationale for what they do."

    Behind the short-term crisis rhetoric, the demise of the pension era is as much a product of economic ideology as circumstance. In the wake of career and employment (with redundancy now a first rather than a last resort for cost-cutters), the abandonment of pensions completes the transfer of employment risk to the individual and the sacrifice of corporate welfare on the altar of shareholder value.

    Significantly, Shell's closure of its surplus-making scheme was made "to reflect market trends". That's not quite as blunt as Jeff Immelt's "the pension has been a drag [on earnings] for a decade" as he closed GE's US scheme in 2010, but still a reflection of the desire to boost profits – and, indirectly, executives' own pay – rather than economic necessity. Companies were keen enough to exploit the benefits of their pension funds in good times, using them to fund redundancies and as late as 2004 – when dividend payments outstripped pension contributions by four times – happily taking pension holidays that amounted to at least £20bn overall.

    In her feisty book Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers, Ellen Schultz notes that pensions do indeed constitute a burden on US firms – but they are largely those, overt or hidden, of the top 1%, which are swelling as those of the 99% at the bottom shrink. Not so much beleaguered captains struggling to keep the boat afloat, chief executives are "silent pirates who looted the ships and left them to sink, along with the retirees, as they sailed away safely in their lifeboats", she says.

    It couldn't happen here? It already has: same self-manufactured crisis scenario, same unholy alliance of self-interested top executives and global financial facilitators (including fund managers subject to the same perverse incentives), resulting in the same destruction wreaked on long-term savers and the economy as a whole. Pensions are the financial crisis in microcosm, with exactly the same winners and losers.

    http://www.guardian.co.uk/money/2012...shell-unilever

    PS - Get the 'Hell Out' of 'Paper Assets' (NOW) or your going to be sorry..!
    The (TRUTH) is simple, its just plain old (COMMON-SENSE)..!

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