Monday, October 23, 2006

The Great Pensions Robbery

Brown's 100 billion raid

I've had a fairly long and tiring weekend with little time left to blog, but I managed to keep the Daily Photos running and had time to take in Sunderland's win against Barnsley. However, having recently turned fifty, I was contemplating my later life and considering how much less well off I might be as a result of Gordon Brown's raid on my final salary pension scheme. I'm not alone, as thousands of others too will likely take part time employment well past the time when we had planned to stop working altogether.

As a result of the Chancellor's very first budget after NuLabour came to power in 1997, at least 100 billion pounds has been wiped off the value of private pension funds.

The Sunday Telegraph seems to have been the only paper in the mainstream media to have taken up the tale and it makes horrifying reading - here's an extract;

Last week, The Sunday Telegraph made public an authoritative new research paper which showed that a seemingly innocuous tax change by Gordon Brown, a mere footnote to his 1997 budget, has cost UK pension funds more than 100 billion pounds.

Delivering his first budget, Mr Brown told the Commons that the abolition of "advance corporation tax relief" was a "long-needed reform". At the time, the move went almost unnoticed. Nobody, save for a handful of government and private-sector actuaries, understood the implications of what he had done. And given New Labour's awesome power at the time - fresh into office and with a huge parliamentary majority - few credible voices were raised in protest.

But, over the years, the impact of Mr Brown's "pension stealth tax" has become all too clear. By removing relief on share dividends, the Chancellor denied pension funds income to the tune of about 5 billion pounds a year. When you take into account the fact that those dividends are often re-invested, the true financial impact of this move soon escalates to eye-watering levels.
It is the power of such compounding that means that even our new estimate of the full impact - 100 billion pounds - may still be too low. Even so, it is more than twice as much as the combined pension deficits of this country's biggest 350 companies.

You can read the full five page article - here

Some of the readers comments to the follow up article this week are scathing. This is just a selection.

Simon Coulter said;

"I've said it before and I'll say it again: Gordon Brown mortgaged the futures of millions of workers in Britain almost as soon as he came into office.

The hypocrisy of all this allegedly socialist government has done in power in the area of pensions is palpable.

Self-provision (or private) pension schemes have been ruined by Brown's annual tax raid.

Employer schemes have been utterly bankrupted in the same way - so that today they are now closing to new entrants, being redrawn on far less favourable terms for existing members (who are in shock at their bleak future - having always thought they would be OK) - or even becoming insolvent at an unprecedented rate.

Meanwhile the government has not the spine to tackle Civil Service pensions - still gold plated and available at 60 - underwritten by the poor taxpayer."

At the same time they have the gall to flag up that the already pitiful state pension will soon not be available to workers until 68 or even 70.

Bryan Lewis said;

"The strategy of New Labour was very clear. To move 100 billion pounds of pension fund money from the future to be spent today. Bravo! This is typical of modern politics, but rather surprising that we do not have enough mathematicians to do the calculations until now."

It is something worth thinking about for everyone currently contributing to a private pension scheme, the Department for Work and Pensions for years sought to shift workers away from state pensions into the private sector: its leaflets assured people that "final salary schemes give you a guaranteed pension". While all this was going on, however, Gordon Brown was draining billions of pounds from pension funds. His levy, coming at a time of rising longevity and falling stock markets, bankrupted many company schemes. As a result, more than 100,000 people found themselves without the pensions they had been promised (needless to say, MPs are not in this category: their final-salary schemes are underwritten by taxpayers).

The Parliamentary Ombudsman blamed their predicament on "Government maladministration", and asked ministers, not only to cover the workers' losses, but to make a further payment to compensate them for their travails. The Government took the extraordinary step of rejecting the report. Although a small fund was established, its payments have been grudging and niggardly: fewer than 400 victims have received any money.

Chancellor Brown is being thoroughly shameful in failing to offer a proper level of compensation to those who have lost out through Labour's "maladministration" and it would cost just a tiny proportion of the billions the treasury has accrued in order to make a one off payment to put the matter right. This mortgaging of Britain's future by Brown in 1997 has cost us dearly and will continue to affect this and the next generation, and as a result we will see our workforce working on until much later in life because the promised comforts of our private pension schemes will not be sufficient to sustain us until we receive our meagre state pension.


The Sunday Telegraph

Iain Dale Guide to Blogging

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