Tory Shadow Chancellor George Osborne says the ever widening gap between public and private sector pensions is resulting in “pension apartheid”.
Speaking at the Association of British Insurers’ conference in London last week, Osborne said that between 1997 and 2005, 60,000 schemes with a total of a million members between them began winding up and more than two-thirds of private sector final-salary pensions schemes are now closed to new employees.
He said: “The decisions of politicians, along with regulators and the courts, have turned pension expectations into guarantees. The result has been greater security for a few at the expense of greater insecurity for the many.”
Osborne hit out at Chancellor Gordon Brown, saying his “flawed decision” to abolish the dividend tax credit for pension funds was one of the biggest factors behind the collapse of occupational pensions.
He set out proposals for the abolition or reduction of stamp duty on share transactions as a way of recouping some of the money lost through the removal of dividend tax credits. According to a study commissioned by the ABI, stamp duty reduces the value of the average occupational pension fund by up to 12,000 and depresses share prices by up to 7 per cent.
Osborne said: “We are not making unfunded up-front promises of tax cuts and I am not writing my 2010 Budget in 2007 but let me just say that there is now a powerful case for abolishing or reducing stamp duty on shares.”
He said the Conservatives are launching a retirement savings and pensions working group headed by Shadow Work and Pensions Secretary Philip Hammond, which will consider whether the Conservative’s proposed abolition of compulsory annuity purchase at 75 is still the best approach.
The Shadow Chancellor also said that he and his party are in favour of the principle of personal accounts but have concerns over some of the details including the impact of means-testing and potential related misselling issues.
Minister of state for pensions reform James Purnell, who was also speaking at the conference last week, said the advent of personal accounts represented an opportunity for the industry.
Purnell said: “The industry will be able to bid for contracts for the NPSS and we predict there will also be a significant increase in annuity business as a result of personal accounts. Personal accounts have not been created with the aim of competing with the industry but have been designed to complement existing pension provision.”
Osborne said Government U-turns on property in Sipps and alternatively secured pensions were “completely unacceptable” and said ministers had pulled the rug out from under the industry.