Where have all the flowers gone?
It could be the 1990s. Two major employers – Shell and BP – are paying nothing into their pension scheme. They are taking a contribution holiday because the schemes are ‘in surplus’.
This week BP announced it has stopped making payments into its pension scheme because it has a surplus of 35% over the money it needs to meet its pension promises. It follows a similar announcement in October by its rival Royal Dutch Shell which said it was stopping its £67 million annual payment into its pension because it was "heavily in surplus". It’s not as if they need the money. Oil companies are expected to post record profits this year as supply reduces and demand grows.
Between 1987 and 2005 a total of £30 billion was taken out of pension funds because they were thought to have a ‘surplus’ to the money they needed to pay the pensions they had promised. Many of them did not want to do this. They were forced to by a law passed by Nigel Lawson when he was Chancellor of the Exchequer. Any pension fund that had more than 105% of the money actuaries said it needed to meet their pension promises had to get rid of the surplus or face paying tax on it. Most chose to reduce the ‘surplus’ by taking what became known as a ‘contribution holiday’ – the firm did not pay into the scheme until the value of the fund came down below 105% of what the actuaries said it needed.
This £30 billion loss was made worse by Gordon Brown. One of his first acts after he became Chancellor in 1997 was to change the tax regime for shares which took away up to £5 billion a year (though some estimates say it was less, around £3 billion a year) out of pension funds and kept it for the Treasury.
Between them Nige and Gord have taken up to £60 billion out of pension schemes. No wonder most are in deficit. In December the shortfall was estimated to be £20 billion. After a month of falling share prices the figure today is likely to be twice as high. But still less than they have lost over twenty years due to Government action.
Rising deficits are one reason that two out of three of these schemes are now closed to new members and many think the days are numbered for those that are left.
Where have all the pensions gone?
Gone to graveyards every one.
When will they ever learn?
When will they ever learn?
With thanks to Fall River Music © 1961
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