The Government must take responsibility over schemes that went bust. by Paul Farrow
You would be forgiven for thinking that the Government has done wonders for the nation’s savers. If Ed Balls, the Economic Secretary to the Treasury is not speaking to a crowd full of building society supporters, he is lauding the achievements of the Government to a delegation of fund managers.
But when it comes to the Government’s achievements on the personal finance front, Balls’ assessment is wide of the mark. The list of failures is long.
For starters, the £5bn a year tax raid on company pensions has had a devastating effect on people’s retirement pots and dented confidence while the decision to scrap the dividend tax credit has been blamed for the slump in Isa sales. The stakeholder pension has been a spectacular failure, with more than 200,000 plans simply “shells” with not a bean in them, while Ron Sandler’s low-cost savings plans have fared no better.
Doubts have recently been raised over the proposed saviour of the pension crisis – the national pension savings scheme, whose main attraction is automatic enrolment. It may never see the light of day, given that it is Tony Blair’s baby and his time in office is limited.
Balls has also been proclaiming how Isas have made Britain a nation of savers. But official figures do not show growing numbers of savers. Total sales have fluctuated between £27.7bn at worst and £31bn at best since they were introduced in 1999.
What’s more, Isas are all about cash and have done little to encourage an equity investor culture. Sales of equity Isas have not gone anywhere near the dizzy heights of 2000 and slumped to a record low in 2005. Sales have picked up this year, albeit modestly, and 2006 is likely to go down as the third-worst year on record. Balls has remained predictably quiet on the effect that scrapping of the dividend tax credit has had on equity Isa sales.
Earlier this year, the Government caused misery with its dramatic U-turn on Sipps. It angered investors and companies that had been gearing up for the new rules that were to allow residential property and exotic investments to be held within the pension wrapper.
Investors had put down deposits on off-plan flats and spent thousands of pounds on the best vintages. Insurers and advisers wasted months and hundreds of thousands of pounds getting procedures in place. All of them had every right to be seething at the 11th-hour decision.
We will also know by now whether the Government has U-turned on Asps after discovering that people were using them to pass retirement savings, normally lost on death, to the next generation.
But the list of the Government’s failures is topped by one indefensible legacy – its remarkable ability to ignore the plight of 125,000 workers who have no pension after the firms went bust.
At a recent ABI summit, Balls told of the terrible distress caused by the Farepak debacle and that a charitable compensation fund has been established for those affected. In the same speech, he also proclaimed it was the Government’s goal “to tackle pensioner poverty”.
The irony would not have been lost on the 125,000 pensioners who have seen their company pension scheme collapse. Barely 500 have received payouts through the Financial Assistance Scheme set up in 2004. People have died before getting a penny but help is at hand immediately for the Farepak victims.
This is a Government that has washed its hands of the Parliamentary Ombudsman’s report, which found that it had misled thousands of people into thinking their occupational pensions were safe. To say it held no respon-sibility for the victims’ plight is arrogant and insensitive. Senior Government officials, who have their own gold-plated retirement packages to fall back on, should be ashamed.
The Government has the moral obligation to make one U-turn that would be welcomed and accept responsibility for these pensioners. Not to do so would be a travesty of justice for the 125,000 people it has misled – people who will not only struggle to make ends meet this Christmas but for many years to come.
Paul Farrow is money editor at the Sunday TelegraphMoney Marketing
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