This piece first appeared on the Saga Magazine website 4 April 2007
The text here may not be identical to the published text

Brown's pension raid

Like whisky, official advice to Ministers matures with age. And the ten-year-old mash that was uncorked on Friday night was a brew to savour. Here at last in 87 pages of confidential briefings to Gordon Brown before his 1997 Budget are the figures which everyone knew but the Treasury would not admit. Until it was forced to do so after the dogged use of the Freedom of Information Act by The Times.

But the story of Brown’s Pension Raid (Financial Times) is more politics than finance. Yes, in his first Budget as Chancellor Gordon Brown made a complex change to company tax that cost pension funds collectively about £4 billion a year. We knew that. The hit could be absorbed by total surpluses of around £60 billion. We knew they were big. "The pensions industry will complain vigorously….we do not believe these claims are realistic."

So what is new in the revelations of the Great Pensions Heist (Sunday Times) that has filled more than 150 newspaper articles and led news bulletins over the last five days?

Well not much really. We can certainly see that Brown’s Tax Raid (The Daily Telegraph) was not made against the advice of Treasury officials. At no point did they warn against it. Rather they made clear that the tax change was supposed to be offset by increases in the pension contributions paid by companies. These were the same companies after all who had saved £18 billion by paying less into pension schemes over the previous ten years and in a desperate bid to keep their surpluses down had increased the pensions promised by nearly £9 billion and allowed employees to pay £1 billion less in. If all that money – nearly £30 billion – was made available over the next ten years it would have easily made up for the £100 billion Stealth Tax (The Times). And who introduced the rules that made them take this money out of pensions? Conservative Chancellor Nigel Lawson.

One voice of sanity in the discussions on Brown’s Pension Fund Raid (The Guardian) has been the respected pensions actuary Stephen Yeo from Watson Wyatt, a former pensions adviser to the Conservatives. He said on Radio 4 that Brown’s Raid on Pensions (Independent) was "not even in the top three reasons" for the current difficulties of pension schemes. Increasing life expectancy, post-millennium plunges in stock markets, and rule changes which meant early leavers left with more and those who stayed on retired with more, were all of greater importance.

So it’s politics. Stop Gordon at any price. That may – or may not – be a good thing. But let’s not pretend it’s about Pensions Vandalism (Daily Mail). It isn’t.

Paul Lewis


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