How goverments piled costs onto pensions during the good times

Linton

Suggest people interested in the decline in DB pensions read this paper.

Quoted statistics show membership of DB pensions in the UK private sector has been in decline since around 1991. Major declines have also taken place elsewhere, particularly the USA. Causes identified include decrease in average investment returns, increases in longevity, changes in working patterns with more frequent job changes which reduces the value of a DB pension. Another factor has been the increase in the number of small companies where DB pensions have never been common.

It places significant emphasis on changes in accounting standards which increased the balance sheet costs of pension liabilities - DC schemes do not place any liability on the employer.

The paper doesnt say that it's all due to the removal of a tax rebate in the UK in 1997, in fact as far as I could see it doesnt mention it at all.

Thrugelmir

hyubh wrote: »

Er, they clearly are disputed - indeed, they've been disputed in this very thread.

Even the Treasury disagreed with the plan. Brown introduced the measure without consultation. Also Brown said the measure would increase the productivity of industry. Whereas the measure actually backfired as it reduced Corporation tax receipts . As Companies were forced to fill pension deficits. The action was above all highly discriminatory since most public sector pensions weren't affected.

As an individual I have lost out. So much for Mr Browns talk about "hard working families". Just like the won't raise income tax pledge. He went on to raise National Insurance instead.

Given his record as Chancellor it's hardly surprising that instead of becoming Head of the World Bank in 2010 as he thought he would. He's disappeared into relative obscurity. Abolishing boom and bust is a quote that will never ever die.

What's the estimated loss to the UK economy £100 billion.......... ?

Thrugelmir

jamesd wrote: »

Yes. You appeared to be referring to the abolition of relief for ACT in 1997. ACT was abolished for everyone from 1999.

Sometimes people can be to clever for their own good.

kidmugsy

Thrugelmir wrote: »

Abolishing boom and bust is a quote that will never ever die.

That's hardly fair. It was only Tory boom and bust he promised to abolish; he was silent on Labour boom and bust.

zagfles

jamesd wrote: »

Yes. You appeared to be referring to the abolition of relief for ACT in 1997. ACT was abolished for everyone from 1999.

You keep saying that as if it was a tax cut. ACT was advance payment of corporation tax which companies could offset against their tax bill, not a separate tax in itself. After its abolision dividends were still paid with a tax credit (since the company would have to pay corp tax on the dividends distributed), but a tax credit which pension funds (and even non taxpayers) couldn't reclaim.

So the change in 1997 to abolish tax reclaim on dividends distributed to pension funds is something which has negatively impacted on pension funds from then until now. Not a short term effect which only lasted 2 years as you imply.

jamesd

The pension contributions are deductible from earnings before the firm has to pay tax on those earnings. All that shifted was how the pension fund got the money. Before it got it directly via tax relief on its holdings, after it got it via the firm getting tax relief on the money it paid into the pension fund.

It's like arguing that salary sacrifice is bad because there's no tax refund to claim.

zagfles

jamesd wrote: »

The pension contributions are deductible from earnings before the firm has to pay tax on those earnings. All that shifted was how the pension fund got the money. Before it got it directly via tax relief on its holdings, after it got it via the firm getting tax relief on the money it paid into the pension fund.

It's like arguing that salary sacrifice is bad because there's no tax refund to claim.

We're not talking about employer pension contributions into the pension fund, which has always been tax deductible. That didn't change.

We're talking about the tax treatment of investment income received by the pension fund. Which did change, in 1997, reducing returns pension funds got from their equity investments.

jamesd

The employer had to pay the ACT for the tax relief that those who were receiving the tax relief got. After both changes instead of the pension fund getting the tax relief itself the employer didn't have to pay the tax but could instead pay the money to the pension fund directly.

So all that changed is how the pension fund got the money, either in tax relief that had been paid for by the firm or directly from the firm as extra contributions.

The people who lost out weren't the defined benefit pensions which could still get the money directly instead but those in personal pensions who would no longer receive the relief but also wouldn't just get the firm paying them directly instead. Firms weren't about to pay you and me even if they did pay their own internal pension fund.

Cyberman60

Thrugelmir wrote: »

There's no reference to Brown's raid of 1997................

How much has cost those that save for their own pensions?

7 billion approx, compounded for every year since 1997. So :

17 years times 7 billion = 119 Billion + whatever extra that money as it would have built up accumulated per year compounded. I would hazard a guess at about 130-140 Billion lost.

Thus, blame Brown and his Labour cronies for ruining DB pensions !!! :mad::mad::mad::mad::mad::mad::mad:

Linton

zagfles wrote: »

We're not talking about employer pension contributions into the pension fund, which has always been tax deductible. That didn't change.

We're talking about the tax treatment of investment income received by the pension fund. Which did change, in 1997, reducing returns pension funds got from their equity investments.

Are you talking about dividends? In that case the change was tax neutral - coorporation tax was reduced and the tax refunds (on an assumed tax) removed. So the companies could have used the tax decrease to increase dividends - actually perhaps they did compared to what they would otherwise have paid.