Pensions are currently being wiped out.

[MrSmith]

If you can explain what he robbed that would be helpful. How much did he take out of the funds and what was the mechanism he used to do it?

 

Or is it just easier to portray him as the bogey man?

 

He taxed the dividends paid into pensions and ignored the advice he was given by his own officials. The amount taken to date is about £100 billion.

[I1L2T3]

He taxed the dividends paid into pensions and ignored the advice he was given by his own officials. The amount taken to date is about £100 billion.

 

He abolished ACT to rebalance corporation tax.

 

Perfectly rational.

 

The blame for any holes afterwards lies with:

1. Companies

2. Individuals

 

It was completely wrong for the taxpayer to continue part-funding private pensions.

[MrSmith]

He abolished ACT to rebalance corporation tax.

 

Perfectly rational.

 

The blame for any holes afterwards lies with:

1. Companies

2. Individuals

 

It was completely wrong for the taxpayer to continue part-funding private pensions.

 

The tax payer didn't part-fund private pensions, why do you think its right to tax money going into a pension and then taxed again when the pension is drawn.

[I1L2T3]

The tax payer didn't part-fund private pensions, why do you think its right to tax money going into a pension and then taxed again when the pension is drawn.

 

They were part-funded by taxpayers. Absolutely they were.

 

Prior to 1997, for every £80 of dividends received by a pension fund, a further rebate of £20 would be received by the fund from the Inland Revenue.

 

The problem is that any holes after that point were not filled by:

1. Employers

2. Individuals

 

What Brown actually did was redraw the pensions landscape. Companies and individuals responded to it in the most negative way possible. They refused to pay extra into their own pensions, throwing the rattle out the pram because they couldn't get a 20% taxpayer subsidy any more. And at a time of record profits and economic boom. Employees of private companies should ask themselves how they managed to be done over by their employers draining funds and downgrading pensions at a time when record profits were being made.

[MrSmith]

They were part-funded by taxpayers. Absolutely they were.

 

Prior to 1997, for every £80 of dividends received by a pension fund, a further rebate of £20 would be received by the fund from the Inland Revenue.

 

The problem is that any holes after that point were not filled by:

1. Employers

2. Individuals

 

What Brown actually did was redraw the pensions landscape. Companies and individuals responded to it in the most negative way possible. They refused to pay extra into their own pensions, throwing the rattle out the pram because they couldn't get a 20% taxpayer subsidy any more. And at a time of record profits and economic boom. Employees of private companies should ask themselves how they managed to be done over by their employers draining funds and downgrading pensions at a time when record profits were being made.

 

The £20 was a rebate of tax that had already been paid by whoever paid the £80 so all of the £100 came from the same place. You didn’t explain why you think contributions into pensions should be tax and then tax again when the pension is drawn.

[I1L2T3]

The £20 was a rebate of tax that had already been paid by whoever paid the £80 so all of the £100 came from the same place. You didn’t explain why you think contributions into pensions should be tax and then tax again when the pension is drawn.

 

No, you're wrong unfortunately. One of Brown's reforms was to partially revert from the partial imputation system. Pre-1997 corporate tax regime was implemented in a peculiar way which meant in many cases NO tax was being paid on dividends. Brown's reforms reversed that.

 

Any pension shortfalls after that were the responsibility of:

1. Employers

2. Individuals

 

If the landscape changes the right thing to do is react not go into a sulk and moan for the next 14 years. When you look at it rationally companies and individuals have been playing this helpless pathetic victim role. It's pathetic really. People and companies had the capacity to do something about it. They didn't.

[MrSmith]

No, you're wrong unfortunately. One of Brown's reforms was to partially revert from the partial imputation system. Pre-1997 corporate tax regime was implemented in a peculiar way which meant in many cases NO tax was being paid on dividends. Brown's reforms reversed that.

 

Any pension shortfalls after that were the responsibility of:

1. Employers

2. Individuals

 

If the landscape changes the right thing to do is react not go into a sulk and moan for the next 14 years. When you look at it rationally companies and individuals have been playing this helpless pathetic victim role. It's pathetic really. People and companies had the capacity to do something about it. They didn't.

 

They did react; individuals lost trust in pensions and started inflating asset bubbles as a means of proving for their retirement and companies saved themselves money by closing final salary schemes.

[I1L2T3]

They did react; individuals lost trust in pensions and started inflating asset bubbles as a means of proving for their retirement and companies saved themselves money by closing final salary schemes.

 

Arguably, individuals reacted in that way because of the bursting of the dot com bubble and the terrible management of savings (Equitable anyone?), mis-selling scandals etc... All these (mainly self-inflicted) catastrophes befell the savings and pensions industry yet it was somehow all Gordon Brown's fault. Quite simply you can't expect the taxpayer to continue propping up such a poorly managed industry. Brown was right to stop.

 

I may have been too harsh on employers though. With strong growth post-2003 the FTSE 100 pension funds were back in net surplus by 2007. Not so good now though given recent global problems.

 

Final questions for you for tonight. Do you think that given George Osborne's escalating public spending we could afford the £5bn to pump into private pensions again? How do you think that would look at a time when public sector pensions are being attacked?

[MrSmith]

Arguably, individuals reacted in that way because of the bursting of the dot com bubble and the terrible management of savings (Equitable anyone?), mis-selling scandals etc... All these (mainly self-inflicted) catastrophes befell the savings and pensions industry yet it was somehow all Gordon Brown's fault. Quite simply you can't expect the taxpayer to continue propping up such a poorly managed industry. Brown was right to stop.

 

I may have been too harsh on employers though. With strong growth post-2003 the FTSE 100 pension funds were back in net surplus by 2007. Not so good now though given recent global problems.

 

Final questions for you for tonight. Do you think that given George Osborne's escalating public spending we could afford the £5bn to pump into private pensions again? How do you think that would look at a time when public sector pensions are being attacked?

 

I don’t have a problem with the tax payer contributing to a pension when the tax payer will be the beneficiary of that funding; the tax payer funds state pensions, the tax payer funds public pensions, so why shouldn’t the tax payer contribute to private pensions in the form of tax breaks.

Governments take the credit when things are good, they should expect to take the credit when things go wrong, Gordon Brown's decision to tax pension funds may have been the right to do to and people may have found it more acceptable if they had been given a very clear in plain English explanation why it was the right thing to do. To the public that it affected it appeared to be just another stealth tax on their saving.

I wasn’t aware that George Osborn was planning on pumping £5bn into private pensions, and public pensions aren’t being attacked and even if they were being attacked you have already said the tax payer shouldn’t contribute to pensions.

[I1L2T3]

I don’t have a problem with the tax payer contributing to a pension when the tax payer will be the beneficiary of that funding; the tax payer funds state pensions, the tax payer funds public pensions, so why shouldn’t the tax payer contribute to private pensions in the form of tax breaks.

Governments take the credit when things are good, they should expect to take the credit when things go wrong, Gordon Brown's decision to tax pension funds may have been the right to do to and people may have found it more acceptable if they had been given a very clear in plain English explanation why it was the right thing to do. To the public that it affected it appeared to be just another stealth tax on their saving.

I wasn’t aware that George Osborn was planning on pumping £5bn into private pensions, and public pensions aren’t being attacked and even if they were being attacked you have already said the tax payer shouldn’t contribute to pensions.

 

I'm not saying that Osborne is planning to pump in £5bn - it was a hypothetical question based on what it would cost to revert more towards a partial imputation system that would give pension funds the kind of tax breaks they relied on 1973-97. I don't think we can afford it to be honest and especially so in a low interest rate environment where people could be tempted towards excessive (lower-taxed) dividends taking.

 

The point about good times and bad times applies to individuals, employers and pension funds too. They should be allowing for the bad times. If funds fall in value during stock market dips that is categorically not the fault of the tax regime. It perhaps indicates poorly targeted investment and a lack of smoothing mechanisms. It's a bit rich for funds to start moaning when it is their own poor investment decisions that can damage funds way more than any chancellor can.

 

Finally, I do agree that this in typical Gordon Brown fashion was poorly explained and I think that allowed a kind of PR offensive to gather steam - industry and the Tories are very good at that sort of thing. If the average man in the street had fully realised the tax changes were partly about pension fund addiction to tax rebates for dividends that had often never had tax paid on them in the first place then there would have been a lot more support.