View more on these topics

Brown ignored warnings on £5bn a year pensions raid

Chancellor Gordon Brown’s £5bn a year pensions raid has finally come back to haunt him with the revelation that he ignored repeated warnings from his own officials about the long term damage it would have on savings.

Money Marketing revealed last June that, following a Freedom of Information Act request, the Treasury had been ordered by the Information Commissioner to reveal estimates given to ministers on the long term damage on pensions funds caused by the removal of advance corporation tax relief on dividends for pension schemes in 1997.

The Treasury appealed against the decision but finally lost its fight to suppress the information, publishing the explosive papers on its website on Friday evening.

The papers show that officials clearly told Brown that the raid could cost pension providers £4bn a year, that the value of existing pension funds could plummet immediately by £50bn and that the lower paid would be most severely hit.
The revelation could not come at a worse time for the Chancellor as his leadership bid reaches critical point. Brown has come under fire from all quarters, with the Tories leading calls for an independent enquiry into the policy decision and the CBI slamming the decision to abolish tax credits on dividends as a “misjudgment”.

The Treasury defends the 1997 policy decision by arguing it was the “best thing from the point of view of the long term investment opportunities in the UK Government. It also says the Government was responding to calls from the corporate sector to remove a distortion in the tax system that was encouraging them to pay out to much in dividends rather than investing for the long term. It also says the decline of pensions schemes has been caused by the stockmarket crash and increased longevity.

But pensions expert Ros Altmann says: “So, because the CBI wanted a more favourable tax system for UK companies, the new Labour Government decided to sacrifice the interests of unsuspecting pension scheme members and personal pension investors.”

“This is the most unbelievable revelation. It seems the Chancellor was determined to pursue his own priorities regardless of the risks. Effectively he did not understand or did not care that taking so much money out of pensions funds, with no warning and no chance for some to make up the resultant shortfalls, would damage the incomes of those saving dutifully for their retirement – as the Government has always encouraged them to do.”

Informed Choice managing director Nick Bamford says: “I didn’t believe he was fit to be Prime Minister before and I certainly don’t now. Because this was such a technical tax people didn’t notice it and Brown knew this. This is a typical example of sleight of hand which he demonstrated again in the latest Budget with the 2p income tax cut.”
Standard Life head of pensions policy John Lawson says: “If Brown continues to try to pull the wool over people’s eyes then people will not trust him. He has got a track record of making changes without telling the full story.”


NU says don’t burden taxpayers with £1.5bn subsidy

Personal accounts should compete on an equal footing with other pension products and should not be subsidised by taxpayers, says Norwich Union.In its response to the Pensions White Paper, NU says it supports the concept of auto-enrolment but says employers should be able to choose between personal accounts and other products. It says personal account […]

FSA says AVMs need backing by independent valuations

The FSA has warned lenders which use automated valuation models to ensure that properties are still valued independently.The regulator says in a letter to Council of Mortgage Lenders head of policy Jackie Bennett that product providers must remember the limitation of AVMs, which are commonly used to help make instant offers, as they can have […]

Day of the Mifid

This year may well become “the year of the Mighty Mifid”, a title possibly more appropriate for a Hollywood blockbuster than a huge European directive.

Japan Economic Insight

James Dowey, Chief Economist, and Paul Caruana-Galizia, Economist

The conventional wisdom is that following a roughly 50 per cent rise in the stock market in 2013 in Yen terms, the Japan trade is over and done*. So the story goes, those big gains were due to a one-off boost from quantitative easing (QE) and a depreciation of the Yen — policies that one should think of as a palliative to Japan’s economic weakness, but not a cure. Rather the cure, and by implication the necessary condition for a longer-term investment case, is deep structural reforms — a painstaking re-weaving of Japan’s economic and social fabric, no less. The story continues: this is a much tougher test than launching a blast of QE, and one that prime minister Shinzo Abe, although well intentioned and well supported by the public thus far, is likely to fail. Stick a fork in Japan, it’s done…continue reading


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm