Call for new help for victims of pension scheme closures – DEBORAH DUNLEAVY

Deborah Dunleavy, Conservative Parliamentary candidate for Bolton NE and Director of a local firm advising on pensions, today, added her support for demands for new help for the victims of company pension scheme closures. Conservatives are calling a ‘Lifeboat Fund’ to be set up to top up the pension income of thousands of vulnerable people who have their lost pension savings from company pension schemes collapsing, and who now face an uncertain retirement.  

The bold proposals have been put forward to tackle the consequences of Gordon Brown’s 1997 stealth tax raid – which has robbed £100 billion from pension funds. Miss Dunleavy said she found it disappointing that Bolton NE current MP David Crausby was absent for this incredibly important debate. 

In a further development, workers and pensioners face not only the prospect of smaller pensions thanks to the tax, but also soaring council tax bills. Since the town hall pension scheme is directly funded from councils’ stock market investments, council taxpayers foot the bill from reductions in pension fund values due to the pensions tax. 

Due to the pensions tax, demographics and rising town hall salaries, the total cost to council employers of town hall pensions has now soared from £1.2 billion a year in 1997 to £3.2 billion a year last year – equivalent to £177 a year per council tax-paying household in England and Wales. 

Miss Dunleavy said:

“Gordon Brown has destroyed our pensions system, which was one of the best in the world. He robbed today’s and tomorrow’s pensioners of security in retirement through his £100 billion stealth tax raid and then tried to cover up that fact.  

“Today’s pensioners are suffering from soaring council tax, rocketing utility bills and more means-testing. Meanwhile, tomorrow’s pensioners are facing plummeting pensions returns and the closure of company and final salary pension schemes. 

“We’re all paying the price. Gordon Brown’s pensions tax has forced up council tax bills – with councillors taking the flak. Council tax payers are now paying the equivalent of £177 a year just to bankroll town hall pensions. It’s time for a fairer deal for Bolton’s pensioners and the pensioners of tomorrow.” 

Notes to Editors 

GORDON BROWN’S PENSIONS CRISIS 

On Gordon Brown’s watch, occupational pension provision has declined catastrophically and over a hundred thousand people have lost their pensions. 

• £100 billion stealth tax raid: In 1997, Gordon Brown imposed a multi-billion pound stealth tax on pension funds that has robbed people of their security in retirement, estimated to cost pension funds £100 billion (Sunday Telegraph, 15 October 2006).

• Occupational Pensions crisis: Over 60,000 occupational pension schemes have been wound up or have begun the process of winding up since Labour took office in 1997 (Hansard, 6 February 2006, col. 878W). Former Labour Welfare Minister, Frank Field, has said: “five sixths of the final salary schemes that have closed have done so since 2000; in other words, they have closed under our watch” (Hansard, 31 January 2006, col. 257).

• Final salary schemes in decline: Only a third of final salary pension schemes are still open to new members (National Association of Pension Funds Annual Survey, 2007).

• Lost pensions: Since 1997, around 125,000 people have lost some part of their pension due to the insolvency of the sponsoring employer or because the employer is no longer in business (Hansard, 30 March 2006, col.1205W).

• Worst pensions system in Europe. Frank Field, Labour’s first Welfare Reform Minister, has said: ‘When Labour came to office we had one of the strongest pension provisions in Europe and now probably we have some of the weakest’ (Frank Field, Evening Standard, 12 October 2004).

A list of the Labour MPs who voted to support Gordon Brown’s pension tax in a Parliamentary debate on 17 April can be found at: 

Hansard, 17 April 2007, col. 263.

http://www.publications.parliament.uk/pa/cm200607/cmhansrd/cm070417/debtext/70417-0021.htm

[Ayes: for a motion of no confidence in Gordon Brown's pension record; Noes: supporting the pensions tax] 

THE EFFECT OF BROWN’S PENSIONS TAX – THE ‘PENSIONS CALCULATOR’ 

Financial firm, Brewer Dolphin Securities, have set up a ‘pensions calculator’ to calculate the effect of Gordon Brown’s tax raid on your pension. The calculator is available at this link:

http://dev.brewin.co.uk/pensiontaxcalculator/Calculator.aspx 

CONSERVATIVE PROPOSALS 

Conservatives are calling for a new ‘Lifeboat Fund’ to be set up to top up the pension income of thousands of vulnerable people who have lost pension savings from company pension schemes collapsing and who face an uncertain retirement.  

The Lifeboat will be funded by unclaimed pension assets and Treasury loans. In the long-term, the Lifeboat would be funded by collecting unclaimed assets within the pensions system. But it would receive Treasury loans in the meantime to allow it to start making payments immediately. This would get money flowing quickly to those who have suffered most and who have seen little or no benefit from the Government’s slow and bureaucratic Financial Assistance Scheme. 

PENSIONS TAX ADDS TO COUNCIL TAX TOO 

The small print of the Treasury’s advice to Gordon Brown, revealed by the Freedom of Information Act, shows the cost to town halls of his pensions tax: 

“Most public service pension schemes are unfunded. But some, mainly in local government, are funded. The local government scheme has some 100 separate funds; about 1.3 million members; and some £50 billion in total assets with £30 billion invested in UK equities. The financial situation of these funds varies. Some are in surplus but many have deficits. The GAD estimate that the shortfall in assets could be around £3 billion. But the local government scheme is not affected by the Minimum Funding Requirement in the Pensions Act 1995 and so the Government would be able to determine the timescale for making good the shortfall. For example, if the cost were spread over 20 years, the maximum extra contributions could be around £500 million, although a central estimate would be about £300 million a year. And, because of the timing of the actuarial cycle these costs would not start until 1999/00” (HM Treasury, FOI disclosure: Assessment of impact on pension providers and friendly societies, paras 15-16). 

A separate document lists a chart showing the effect on local authority employer contributions of the tax – with a £300 million cost in each year from 1999/00 (HM Treasury, FOI disclosure:  Assessment of wider economic impacts, p. 54-55).

http://www.hm-treasury.gov.uk/about/information/foi_disclosures/2007/foi_dividendtaxcredits_2007.cfm 

Last year, Steve Bundred, Chief Executive of the Audit Commission criticised inadequate accountability arrangements of the Local Government Pension Scheme and the burden on local taxpayers may rise even further: “What if the markets do not pick up sufficiently? In that case, at some unspecified date in the future, someone will have to start bailing out the funds. That someone is most likely to be the local taxpayer” (Financial Times, 10 August 2006).

http://www.ft.com/cms/s/f84a2af4-280c-11db-b25c-0000779e2340.html 

The Local Government Pension Scheme (LGPS) is a funded, final salary scheme, and overseen by central government. It is different from other public sector schemes, such as those for civil servants, teachers, firefighters and uniformed police forces. 

The Government has estimated that 73 per cent of the schemes liabilities in England & Wales, as of March 2004, were funded (individual councils will vary – some have even greater shortfalls). The total valuation of the scheme at that date was £81 billion in England and £5 billion in Wales. This suggests a total funding shortfall of £32 billion. 

Hansard, 15 June 2005, col. 548W

http://www.publications.parliament.uk/pa/cm200506/cmhansrd/cm050616/text/50616w08.htm#50616w08.html_wqn9 

The Government has stated that councils in England and Wales are now spending approximately £3.2 billion a year on making contributions to the scheme. 

Hansard, 9 October 2006, col. 400W.

http://www.publications.parliament.uk/pa/cm200506/cmhansrd/cm061009/text/61009w0086.htm#06101247000114 

This is up from an estimated £1.2 billion in 1997-98 (total cost £1.5 billion, of which councils pay 80%). 

Hansard, 9 March 2006, column 1751W.

http://www.publications.parliament.uk/pa/cm200506/cmhansrd/cm060309/text/60309w30.htm#60309w30.html_wqn6 

There are 21.3 million households eligible for council tax in England and 1.3 million in Wales. 20 per cent of homes pay no council tax since they are on 100% council tax benefit. A £3.2 billion a year cost is thus equivalent to £177 a year per council tax paying household. 

ENDS