The Pension raid by Gordon Brown known as the Beginning of the End for many personal and private pensions was on 17th March 1998.
This was the date of Gordon Brown's first full budget as Chancellor of Exchequer.
The speech was entitled New Ambitions for Britain but rather sadly Gordon made some rather drastic changes which have come back to haunt him and will do so again and again and probably for the rest of his life. It is rare in history that so much was lost by so many by so few (Gordon Brown).
The 17th March should be renamed "The day I plundered the pension of the ordinary working man" because that it is exactly what Gordon Brown and this is very much borne out by history. He claims that he is not responsible as Stock Markets fell but he was advised by his own treasury officials not to take the course of action that he did but he ignored their advice. This is not the mark of a prudent man.
Documents were released on 30th March 2007 under the Freedom of Information Act from Her Majesty's Treasury which show that Internal Treasury forecasts, advised that the changes would "cause a shortfall in existing assets of up to £75 billion" and that "employers would have to contribute about an extra £10 billion a year for the next 10 to 15 years to get pension scheme funding back on track".
These papers that were sent to Gordon Brown the Chancellor before he did away with the dividend tax credit and also advised that the worst effected victims would be the poorest members of society.
THe released Treasury documents show that Gordon Brown was advised that pensioners could lose up to one fifth of their income as a result of the changes to the tax system that he implemented.
The paper, issued by the Savings and Investment Division of the Inland Revenue, predicted that a pensioner on an average occupational pension income of £5,000 a year would lose £150 a year, but they issued a clear warning that “at the extreme, if the UK Stock Market fell by 20 per cent and the pension fund was wholly invested in the UK then a pension of £5,000 a year could fall by £1,000”. The officials added that “quite clearly any loss of pension could be difficult for someone with a small income to cope with”.
Despite this clear cut advice he still went ahead.
These are some of quotes of what ministers told the ordinary man in the street.
“Pensioners, in my view, will not lose out over this in the way that people are suggesting”
Gordon Brown, BBC News, 3rd July, 1997
“We are not raiding pensions — that is just ridiculous”
Gordon Brown, GMTV, 3rd July, 1997
“Nonsense.”
Gordon Brown, 3rd July, 1997,
On claims that people would have to make higher pensions contributions
“There is no question that in the long term and the medium term it will be good for companies and it will be good for pensioners”
Alastair Darling, who was then Chief Secretary to the Treasury, July 3, 1997
Lets have a detailed look at the disastrous course of action that he took.
At one stroke he removed the ability of pension funds to reclaim the Advance Corporation Tax (ACT) that they received on their dividend income.
He did not just set in place a drastic fall in the income and thereby the value of pension funds he also helped to lay the foundations for the fall in the UK stock market through out 2001,2002 and 2003. Markets work on supply and by reduscing the funds income he reduced their demand and indeed their appetite to buy into the UK Stock Market.
This action of doing away with the tax credit and therefore reducing the income of the pension funds also made it much more difficult for them to remain solvent and his actions undoubtedly did not help the failure of the ill fated Equitable Life a mutual company that had been in existence since 1768.
But the results of his actions go much deeper than this as many with profit pension funds such as NPI (National Provident Institution) came out of the stock market completely. So once you have a very big player coming out of a market never ever to return you can not then be surprised that the Stock Market went downwards.
The point of all this is that funds grow by reinvesting the dividend income and Gordon Brown reduced that income by a very large amount.
If he had not done so all the pension finds would have been in a much stronger position. Indeed they would have had far more funds to invest in the equity stock market so probably quite a lot of the stock market fall is attributable to Brown.
This ruination of our Pension Funds is tragic not just for those who in later life will find that their pensions are much reduced or those who are now claiming these much reduced pensions. Pension funds used to be good long term investors and ones who would invest in floatations and up and coming businesses such as start ups.
There was a time before Browns meddling where the pension funds were long term investors in British Industry and would take a long term view in their investing and with that comes safety, security and prudence.That is what Brown needed prudence no more Boom or Bust to acheive that you keep the pension funds on board not what Gordon Brown did which was to alienate them.
In the House of Commons recently when David Cameron challenged Gordon Brown in Prime Minister's Question time, Gordon Brown denied, yet again, that he had any part in the decline of private pensions in Britain. He pointed out that the pension industry as a whole was in surplus before the stock market fall and you can not blame him for any deficit.
He makes very little sense and yet again he refuses to take one jot of responsibility for his own actions.
This is the man who cannot see a speck of saw dust in his eye but he sure can see a 6 foot plank in every body else's. So as he says it is not his fault, it is the markets fault, but what he forgets or perhaps does not know is that the pension industry has,in the past,survived much harder stock exchange crashes.
I think that what he knows about pensions can be printed on the back of a postage stamp or a pin head. Plainly he is a complete financial disaster who blusters his way in an argument but you can not fool all of the people all of the time and this is I think is one of his greatest mistakes that will haunt him for the rest of his life.
It is about time that he owned up to his own mistakes. I often wonder if he just simply wanted to distroy the Pension Industry and the Capitalist System at a stroke. I say this as he ignored the advice provided by the Savings and Investment Division of the Inland Revenue and I have no doubt that they knew a lot more than he did at the time.
Gordon Brown for Britain?
You must be joking Gordon Brown stole our pensions and ruined the UK Pension Industry.
He sold our Gold at a 20 year low on which he ignored advice from the Bank of England. His assistant at that time was Ed Milliband.
Unemployment now stands at record levels since 1994.
A future fair for all will have to be with out this Financial Fool.
