Saturday, March 31, 2007

Pension snatcher Brown defied £5bn pensions warning

ED: So Cival servants arn't so stupid after all. How any honest person could maintain that snatching £5bn from the pension system would not have a seriously negative impact beggers belief. But don't worry Gordon and his mates' pensions are all gold plated so that they don't have to suffer like us prolitariate mugs.


Gordon Brown ignored repeated warnings that a tax raid on pension funds - one of his first moves in office - would cost savers billions of pounds a year.

Newly-released documents show that the Chancellor was told his money-raising scheme would hurt the poor and damage the savings industry.

The decision to scrap tax relief on dividends paid into retirement plans came in Mr Brown's first Budget in 1997, just weeks after Labour took power.

The move has been widely blamed for a crisis which has left huge shortfalls in pension pots and encouraged hundreds of firms to wind up their final-salary schemes.

The Chancellor has consistently denied that the pensions industry was harmed or that workers were left facing lower pension payments. As recently as Thursday he rejected accusations from MPs that he had blundered.

But documents that the Treasury was ordered to release under Freedom of Information rules reveal that back in 1997 senior officials were concerned at the impact of the tax grab.
"We agree that abolishing pension tax credits would make a big hole in pension scheme finances," they told Mr Brown.


The Treasury has fought for several years to prevent its advice to the Chancellor from being made public for fear that it would expose internal divisions.

A report from Terry Arthur, a fellow of the Institute of Actuaries, warned last year the decision has cost pension savers at least £100billion. Other estimates make the losses even higher.

The papers, released late last night, show civil servants predicted the move would provoke "clamour and public consternation" and create "a big hole in pension scheme finances".
Mr Brown was told "there is therefore a very big uncertainty over the extent to which pension schemes could absorb the effect of the loss of tax credits".

The change would cost pension schemes between £3billion and £4billion a year and employers might have to contribute over £2billion a year more to keep them afloat, Mr Brown was advised.
He was told that money would need to be found to top up local authority schemes and that the value of pension funds could plunge immediately by £50billion.

The advice was also clear on who would be hardest hit: "The change would therefore lead to a reduction in pension benefits for the lower paid' while "those who are about to retire (or who have just retired) could be worst affected".

Some of the advice given to the Chancellor predicted the move could accelerate the closure of final salary pension schemes - something that has happened at an alarming rate since.

Ros Altman, a former adviser on pensions to Tony Blair, said: "They were knowingly embarking on the emasculation of the most successful pension system in the world.

"The Government came in with much hope that things would get better, then set about destroying the retirement security of so much of the population."

Mervyn Kohler of Help the Aged said: "This is staggering. There is a strong feeling among pensioners that they have been let down by this Government, and this information will only reinforce that perception."

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