Railway workers’ pensions are under threat as the regulatory response to market instability triggers a £15bn deficit in their pension scheme.
The Railway Pension Scheme (RPS), of which 350,000 rail workers across over 150 companies are members, provides defined benefit (DB) pensions. DB pensions, based on the number of years worked and the amount of salary earned, are a much better deal than so-called ‘defined contribution’ pensions, which are not linked in the same way.
DB pensions implicitly recognise that a pension is no more and no less than a worker’s deferred wages. As the capitalist crisis has sharpened, though, this form of pension has come under increasing attack, with many DB pensions giving way to inferior arrangements.
Rail workers, led by the RMT union, have until now successfully resisted the pressure. But now rail pensions face a new threat.
Under capitalism, pension pots are invested in the stock exchange, on the assumption that the return on investments will be enough to cover pay-out on retirement. It has now been revealed that the RPS, in order to remain solvent, has been relying on relatively high-risk investments with correspondingly higher projected returns – if all goes well.
Now, though, in a panic over growing market instability, the pension regulator is turning up the pressure on pension schemes to scale down their high-risk investments in favour of lower-risk ones with correspondingly lower returns.
As the Financial Times explains: “Under current rules, DB schemes, which promise a secure pension for life, have flexibility over the financial assumptions used to value pension promises.
“But under the proposed overhaul unveiled by the regulator in March, deficits at many of the UK’s 5,500 DB schemes are likely to increase as they use less rosy assumptions for future investment returns, inflating the cost of liabilities.” (Rail sector pension fund warns of £15bn finance hole under new rules by Josephine Cumbo, Financial Times, 11 September 2020)
When in doubt, the capitalist motto remains: make the workers pay. Whether this takes the form of extorting higher employee contributions, diluting the DB guarantee, or shutting down the scheme entirely, it is the workers who will be expected to take the rap, and this must be resisted.
Rail workers are entitled to get their deferred wages restored in full on retirement, without regard to the games which employers may choose to play on the stock exchange.
Our motto must be: Make the bosses pay.