The same pension funds had no problem with the notion that when returns were better than expected they could pay less or nothing at all, paying the money out to the shareholders. The converse should have been true: as soon as they saw that their return would be lower they should have increased their contributions. When sensible people see harder times ahead they make provisions for them; the rest do nothing and then blame everyone else for their failure to do so.
No-one has come out of the recent pensions debacle covered in glory. Gordon Brown *did* rape the pensions industry; no politician can look at sums of money belonging to others without thinking that they could spend it much better then the people to whom it belongs. The companies *are* motivated by greed and short-termism, exacerbated by stupid legislation that pension funds are allowed neither to be in credit or deficit. Trustees of pension funds are spineless "yes men". And the regulators sat on their arses with their thumbs up their bums. Of course, most of the people involved are insulated from the consequences of their own actions, which doesn't help ...
You seem to be confabulating :
Big pension funds run by big companies themselves with Pension schemes run by insurance companies that small companies use.
We never took any pension holidays.
My pension scheme was started in 1987, and the pensions adviser said it was all overseen by the inland revenue and was perfectly safe. Neither I nor the company had any access to the fund. The pension scheme was a 30 -40 year contract but GB changed the rules in the middle and started raiding the fund. The pension provider continued to take his fees even as the fund went down, and yet we couldn't change providers without paying IIRC 10% of the fund in exit charges.
My analysis is that GB raided the pension funds (To the extent of 150 Maxwells) at the height of the dot com boom, and then proceeded to spend the money, as is his want. When the dot com crash came he wasn't in a position to forego the income.
The pension funds were going down, it wasn't just the dot com crash BTW, there was Sept 11th and Enron. & more. It would have been good money after bad.
IIAC 66% of Council Tax revenue goes to shoring up local government pension schemes. Would you say that all these local authorities have been just as imprudent.
DG
GB *did not* raid or "rape" any pension funds. He altered the tax rules so that a small proportion of the money going into those funds (i.e. dividend payments) were taxed. In very rough figures, it's something like 10% (dividend tax credit) of 10% (a generous dividend rate) or 1% reduction in the money going into the fund. That could easily be made up by increased contributions by employer or employee.
There are, of course, individual cases where the company collapses leaving a hole in the pension fund that could have been made up over time if the company survived. They are usually down to bad management rather than anything the treasury does.
So, you admit it had little to do with loss of dividend tax credits and more to do with the general malaise in the economy.
The Fire brigade pension fund, for one, is a *huge* money pit. That's a different issue caused by schemes that allow members to retire well before the normal retirement age on a (all things being equal) very good pension.
MBQ
It can be, by why should it be? People entered into pension schemes encouraged by the government with a defined tax structure and for long term investment.
Theft is an emotive subject. Investors in pension funds have been willing to accept the risks of the market. It is not reasonable for the government to worsen the tax treatment, by however little, on this type of investment. They will already receive income tax during the payout phase as it is. The reality of the situation is that Brown saw an easy to tap source of money that he hoped could be garnered with little or no fuss. He was warned by the Treasury of the potential outcome but proceeded anyway.
Nowadays he is claiming that he has done nothing wrong. Perhaps he'll be able to fool some people with that...
Indeed. And previous to this tax many pension funds were awash with money and giving themselves a contribution holiday as well as extra perks for their *employees* etc. Had they used that extra to improve pensions perhaps the government wouldn't have seen fit to introduce that new tax.
But since that excess had been achieved by allowing tax relief on contributions in the first place I can see why a chancellor would seek to get some of it back.
No one likes paying taxes. But it's a fact of life that every country has them. If you seek to reduce one another will simply be raised - unless the government actually cuts expenditure which is very unlikely despite the claims made by some.
You forget that pension contributions largely aren't subject to tax like other personal income. And the amount you're allowed to invest is subject to a limit and other controls. So if this pot was larger than needed I can quite see why a chancellor should seek to remove some of the surplus rather than let it be given only to shareholders and employees of the pension company.
I think that that should always be an objective.
You're asking for two one way bets here: the government can lower taxes but not increase them; shareholders can have the benefit of a contributions holiday when returns are better, but should not be expected to pay more when they are worse. The 1997 change was coupled with a 2% reduction in the rate of Corporation Tax.
Two stories on the BBC news page now show that some pension funds are ahead of the game, others not:
"Oil giant Royal Dutch Shell has temporarily suspended payments to its pension scheme.
The "pension holiday" is a sign the fund - one of the biggest UK pension schemes - has a healthy surplus."
That's easy. it's not income. You can't get your mitts on it until you retire, then you get an income and pay income tax on it. How can you pay tax on income you haven't received ? Don't tell me = you put it on your credit card, a typical Nulab idea.
Yes this was controlled. If you comply with those controls (which were stringent enough) written by the Inland Revenue that should suffice, you don't want the chancellor coming along after 15 years worth of contributions, pulling the plant up by the roots and taking cuttings from the ones that are successful for himself.
But nobody could possibly know that given the possibility of rainy days to come, unforcast longevity, terrorist incidents & such. The Chancellor doesn't give it back if the fund runs into trouble, it's a bit of a "one way pendulum" in that regard.
Income should be taxed as it is received.
Investments should be taxed when they are realised.
In our scheme the pensioners paid it by getting smaller pensions !
As you know it was normal in the BBC to give lard arsed time servers an extra grade in their last few months before retirement to enhance their pension. I didn't like that because of the de-motivating effect it had on new recruits, but it was one way that any surplus in the pension fund went back to the people who had contributed to it.
DG
WTF? Horses can travel at how many MPH
They are paid for out of your income - and that income is taxed. But the pension contributions aren't.
As you do on the interest from any savings. Which is what a pension is.
Of course you receive it. You then pass it on to the pension scheme.
You seem to have a problem with the Labour party. Obviously have a short memory if you don't remember the damage the Thatcher woman and her party did to society which will take generations to get over - if ever.
I have a completely different take on this. I was a director of a £1bn pension fund for some 12 years.Ignoring the disparity between private company and public pension schemes, the UK pensions system was the envy of most of western Europe; that is it was sustainable and not running up massive debt as was happening ( and I believe still is) in some countries.
One of the failures was that at times of plenty, private companies were put under pressure to take contribution holidays - by both government and the City. Madness to my mind, at times of plenty, funds should be squirrelling money away to help in times of difficulty. The issue of longevity should have been accommodated by the actuaries.
Brown's raid upon pension funds was unforgiveable. Few private companies are prepared or can now afford to provide defined contributions pensions. This has heightened the disparity between public sector pensions and company pensions.Our kids working in the private sector have little encouragement to save enough for their later life.
I cannot agree with that. When I was a trustee, I was highly vocal when the directors of the company wanted to do a Boots selling shares at a low value in the market to buy bonds at the significant loss to the fund. As a result of my belligerence, we phased moving the funds in a mature pension scheme over a period of several years saving the fund somewhere between £50 and £100m as the market moved.
The major impact of Brown's actions will not be seen for decades.
OTOH, he could have changed the law to prevent companies from syphoning off the "surplus" (which as subsequent events showed, was no such thing). he didn't. He decided to steal it.
I think you mean "defined benefit". Most pension schemese *are* defined contribution these days.
Oh, dear. I thought you were more intelligent than that.
I was generalising.
They're already being seen. Tried to get into a final salary pension scheme lately?
Or more to the point made them pay it back? But then you'd not be in favour of such a thing?
Interesting the way you call a tax (where we all benefit from that money) 'stealing' but not the true 'theft' where the 'surplus' was removed and given to only a few.
And you think that's down to Brown's actions? Thought you were more intelligent than that.
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