How goverments piled costs onto pensions during the good times

hugheskevi

This old Pension Policy Institute briefing note is worth reading for a quick overview of the policy and the number involved (not quite £7bn a year)

zagfles

Linton wrote: »

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.

How was it neutral? In 1997 the main rate reduced by 2% (from 33% to 31%), nowhere near making up for the loss of the 20% tax credit

zagfles

jamesd wrote: »

The employer had to pay the ACT for the tax relief that those who were receiving the tax relief got.

Eh? The "employer" didn't pay ACT, not in their capacity as employer anyway. Or are you assuming all occupational pension schemes were run by companies making profits and paying corporation tax? Or that the size of the employer's pension fund, which could have decades of liabilities, was in any way related to the profitability of the company?

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.

You really have lost the plot with this. It's a well accepted fact that the abolition of tax credits on dividends had a negative impact on occupational pension funds. People may argue about the extent, but nobody credible claims it had no impact.

zagfles

hugheskevi wrote: »

This old [URL="file:///C:/Users/Kevin/Downloads/PPI_Briefing_Note_22.pdf"]Pension Policy Institute briefing note[/URL] is worth reading for a quick overview of the policy and the number involved (not quite £7bn a year)

That seems to point to a local file on your PC!

hugheskevi

That seems to point to a local file on your PC!

Bah, fixed it in the post above. Cheers.

BobQ

jamesd wrote: »

It's still a contribution from her to the Guardian's cartoon strip, not to a serious pension story. Handy for those with a glass half full view to cast all of the improvements in pension protection for employees as bad, I suppose.

I'm not in the pension industry. Nor in financial services at all.

James,

You can dismiss it as a relating to a strip cartoon, but Altman has a reputation and I cannot accept that she would damage it by making unfounded statements.

(ETA Incidentally Ms Altman has been arguing this for some time as per her website. For example: http://www.rosaltmann.com/crisisfacingUKemployers.htm

Those employed had an employment package that was based on their employer making contributions to THEIR pension scheme. You can justify why the employers dipped into the employees pensions in any way you choose but the fact remains that the demise of many private sector DB schemes is due to the way they were allowed to renege on the contributions. Had they continued to contribute then private DB schemes would not have declined in the lifetimes of most of those who were part of those schemes.

BobQ

Bootsox wrote: »

There is one man, and one man only, to blame for trashing the final salary pension and that is Gordon Brown.

http://www.dailymail.co.uk/news/article-1266662/The-man-stole-old-age-How-Gordon-Brown-secretly-imposed-ruinous-tax-wrecked-retirements-millions.html

Another politically balanced comment from the Daily Mail....

BobQ

Thrugelmir wrote: »

1997 was a few years earlier I think you'll find.

Civil Service Pension scheme of which I'm now fortunate to be a member of. Is something that many in the private sector can only dream of, even now.

Contributions were increased for that pension in 2002 (Premium?)?

But I agree the benefits are now far better than most private schemes what at that time were declining (after all those pension holidays).

BobQ

hyubh wrote: »

For sure, but civil service pensions were historically non-contributory final salary...

Not really, CS pensions have always accounted for a contribution by employer and employee. While the financial contribution of employees was always set as zero (in terms of what was deducted from their gross pay), this was because it suited the employers to do it this way. What matters as ever is the total reward package for the employee.

taktikback

companies were not allowed to fund their schemes at more than 15% over fully funded -they had to take holidays...