Hard-won pension rights for workers are under attack across Europe, sparking mass protests and general strikes. What is less well known is that European Union institutions are behind these attacks.
EU institutions have long been imposing an EU-wide strategy to dismantle pension systems, drive down wages and cut public spending. This strategy was initially drawn up by the European Round Table of Industrialists (ERT), a corporate lobby group of multinational companies and employers.
In other words, the sight of greedy British employers closing down final pension schemes or our government attacking public sector workers' schemes are not simply independent acts of callous stupidity. They are part of a systematic onslaught by European capital on workers' pensions throughout the continent.
The unelected European Commission and its endless anti-worker directives are the real source of many of our problems. The rules of successive EU treaties, from Maastricht to Amsterdam, are exerting downward pressure on public sector spending across Europe. This has led to constant attacks on living conditions and pension expenditure.
Pensions are deferred wages and represent a lasting social commitment to the well being of workers. Yet, within the short term aims of the planned European Single Market, there is no place for workers' long term security.
EU-backed employers are also putting on serious pressure to privatise public services, including health and education and pensions.
Pensions 'crisis' explained
Britain has 75 per cent of the EU's total occupational pension scheme assets, amounting to approximately £750 billion. This occupational wealth has been put aside to pay present and future pensions and represents the equivalent of 81 per cent of Britain's Gross Domestic Product (GDP).
By comparison, occupational pension provision in Germany represents just 16.3 per cent of its GDP, with equivalent figures for France at 6.6 per cent, Italy at 2.6 per cent and Belgium at 5.9 per cent.
Britain's pension funds hold record levels of overseas stocks and shares. The average fund now has 28 per cent of its assets invested elsewhere with some funds having as much as 50 per cent. In the meantime, Britain is in desperate need of investment.
Now Brussels has legislated to grab the rest by further liberalising national investment rules for pension funds and enabling big transnational companies to provide pension plans for staff, reducing costs by millions per year.
The EU directive on pensions enables a financial institution in one member state to manage company pension schemes in other member states.
This simply results in the exit of more capital from this country.
The cost of occupational pensions has increased by some 50 per cent over the past eight years. This has not come about by accident or because workers are living a couple of years longer during retirement, but because it has been planned by the Treasury in two key stages.
In 1995, the Tory-run Treasury began looking at ways to meet the EU convergence criteria for the euro as required by the Maastricht Treaty and the
1996 Stability and Growth Pact (a pact which even former EU commission president Romano Prodi described as 'stupid').
As a result, it reduced government debt by curtailing the use of the UK financial gilt market.
A gilt is a promise by the government to pay interest on a loan, which it has raised from the capital markets, with the loan becoming fully repayable at the end of an agreed period, ie gilt-edged security.
At the time, the government said that it was reducing the national debt. What it really meant was that the government was no longer able to help finance its revenues through the issue of new gilts because it would contravene the public borrowing parameters laid down by the EU.
The result was that the supply of new gilts ceased, whilst at the same time the demand for them increased, especially for those of 15 year and 20 year duration.
Longer term gilts have always been ideal financial instruments to underpin occupational pensions when in payment. This is because people retiring at age 65 tend to go on living for a further 15 to 20 years.
Unsurprisingly, the price of the remaining gilts issued in the market prior to 1995 have since rocketed, to the extent that the cost of, for example, a subsistence level of pension of £7,500 per annum payable to a male aged 65, now requires at least £100,000 of capital to match the financial liability whilst in payment.
The policy of no longer issuing new gilts has continued since 1997 and so it is small wonder that the cost of pension final salary guarantees has increased in the manner they have, hence employers want to ditch them.
Minimum funding requirement
Another way of meeting EU public spending rules was the introduction of the Minimum Funding Requirement (MFR), conceived in 1995 at the time the Treasury decided to dry up the gilt market.
The MFR is a method of measuring the solvency margins of an occupational final salary pension fund. It was put in place to gauge the impact that the government's reduced borrowing requirement would have on our pension funds. In other words: create a problem, measure it and then call it a 'crisis'.
Since 1997, the MFR has identified huge deficits in occupational pension provision. Once identified, the employer then has to make good the deficit
by paying in large amounts of capital to make up the shortfall.
In practice, what happens is that the MFR acts as an excuse for the employers to wind up their final salary pension commitment. This makes the MFR a convenient hiding place for the employer.
It is also a distraction away from the government's failure to issue gilts, and shifts attention from the fact that throughout the 1980s and early 1990s employers were boosting their profits by taking surpluses from our pension funds in the form of 'pension holidays'.
Big business rules
In 2000, the European Round Table of Industrialists (ERT) had a summit on the future of European capital and produced a report on pensions to lobby the EU's own Lisbon summit.
The report, European Pensions: An appeal for reform, urged Brussels to order member states to lift retirement ages, stop early retirement and encourage individuals to save for their retirement through tax breaks and private pensions schemes.
"If they are not reformed soon, public pension systems in many EU member states pose a threat to the competitiveness of the European economy", the report said.
The EU dutifully complied by agreeing the 'Lisbon agenda' and began to harmonise national pension strategies.
"Member states have to prepare for the challenge of accelerated demographic ageing which will make it more difficult to provide adequate pensions in a financially sustainable way," the European Commission declared.
In December 2001, a set of eleven common objectives for the modernisation of pension systems were adopted as a basis for closer cooperation in accordance with the 'open method of coordination'."
Member states submitted their first reports on their strategies for securing adequate and sustainable pensions in September 2002.
No sooner had the ERT employers spoken in 2000, an EU Report on Adequate and Sustainable Pensions appeared which echoed the ERT with the simple objective of making us work longer and harder for less.
Working harder for longer
The key issue for trade unionists is that these co-ordinated policies require employees to work harder for longer and for less in retirement.
Here are the key paragraphs from the report explaining the attack on workers' pensions throughout Europe.
"Achieving the general employment targets set in Lisbon will not be possible without increasing the employment rate among older people.
This makes it necessary to adapt pension systems and other aspects of tax/benefit systems to encourage people to remain in work longer".
To force older people to remain in work current age discrimination law is going to be used cynically to raise the age of retirement for all.
The EU report goes on to link the pension issue to public spending.
"Achieving high employment levels will, in many cases, not be sufficient to prevent a substantial increase in public expenditure on pensions as a proportion of GDP.
"Significant reform measures targeted at the parameters and structure of pension schemes (eg benefit levels, eligibility conditions, indexation of pensions, retirement age, relative weight of the different pillars etc) have been highlighted by member states and many of these are already being implemented - although further progress may be required in many member states".
Single European Market
By 2003, the EU issued a new Directive 2003/41/EC to force pension funds to comply with the Internal Market principles of free movement of capital and free provision of services.
It allows pension funds to manage occupational schemes for companies established in another member state and allow a pan-European company to have one pension fund for all its subsidiaries. Employers liberalised the pension fund market and ensured that all states attacked pensions.
Employers told the EU in 2000 to reduce the cost to the state and employers of pensions generally. The EU then tied in national governments to the agreement in 2001 and each national government, including our own, obeyed the orders and started to attack pensions. The attack has escalated
"The government has proposed an increase in the normal pension age of public sector schemes from 60 to 65".
This quotation comes from the UK Government's 'National Reform Programme' published in October 2005 by the Treasury (www.hm-treasury.gov.uk). It represents the UK government's response to the Integrated Guidelines package endorsed by the EU Council in June 2005.
This section of the National Reform Programme is headed 'Extending working lives'.
The same section also reports that from 2010 the earliest age at which a company or occupational pension can be taken will be increased by five years. The 2005 UK response is available on the DWP website:
The response document is designed to meet the requirements of the updated Lisbon Action Plan issued by the Spring European Council 2005 [SEC (2005) 192]. Under the heading 'Develop active aging strategies' it requires member states to ensure the 'suppression of early labour market exit'.
These proposals were incorporated in the proposed Directive on Occupational Pensions.
The UK response supplies detailed answers on steps to increase the working age and ensure more workers contribute to private pension schemes.
There is no mention of any increase in the state pension.
Pensions are under attack because corporate capital across Europe no longer wants to pay for the needs of retired workers. Corporate lobby groups are using the remote corridors of EU institutions to fulfil this goal.
As a result, unions across Europe must fight to defend pensions and resist the implementation of EU diktats which no electorate in Europe has voted for.