[A-List] UK legitimation crisis: pensions, household debt

[Michael Keaney]

The punch line in this article is the comment that ratings agencies are now
examining British banks very closely indeed. Perhaps Henry could fill us in
a bit on the role of these organisations, because they are a crucial link in
the mechanics of the imperialist chain -- witness the Japanese Ministry of
Finance's fight with Moody's et al. Since ratings agencies provide the
imprimatur necessary for states to access international capital markets, but
will not give that imprimatur prior to an IMF blessing (as with Vietnam),
their political role is not to be underestimated.


Pension pressure grows over final salary schemes
SIMON BAIN
The Herald, 12 December 2002

THE government came under fresh pressure yesterday to take radical action on
pensions as the industry reported a doubling of the rate of closure of final
salary schemes.

The annual survey by the National Association of Pension Funds of almost
1000 companies which run final salary schemes found 84 had been closed to
new members this year, compared with 46 last year.

The number of firms closing their schemes altogether and switching all staff
to a money purchase plan shot up from six to 25.

In money purchase schemes, the employer guarantees only his contribution and
the employee takes the investment risk.

Almost one third of all final salary schemes in the UK are now closed to new
entrants, against 12% only two years ago.

The average employer contribution into a final salary scheme was 12%, twice
the 6% into money purchase schemes. But almost a quarter of schemes are
still so well funded, despite stock market falls, that they took a
contribution holiday this year.

The latest figures came ahead of the government's long-awaited green paper
on pensions, due to be published next Tuesday.

Christine Farnish, chief executive of the NAPF, said: "The atmosphere in
which companies provide pensions for their employees is getting thinner.

"We hope the government will produce proposals in the green paper which lead
to a simpler pensions landscape, and which can boost both confidence and
security in the pensions system."

David Willetts, shadow pensions secretary, said the figures were
"devastating" and called on the government to take "bold and radical
action".

A report yesterday suggested that homeowners are starting to dig themselves
into "uncomfortably high levels" of debt - putting them at risk if
unemployment rises.

Credit rating agency Standard & Poor's survey said the level of outstanding
mortgage debt in the UK now exceeded 60% of GDP - one of the highest rates
in Europe.

And the report added that fears of a fall in property prices meant the
agency had put the UK's banking systems on a risk-list for the first time.