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Welfare Reform on the Web (May 2007): Pensions - UK

Gloomy predictions that the Chancellor chose to ignore

A. Browne

The Times, Apr. 2nd , 2007, p.25

Treasury and Inland Revenue documents released through the Freedom of Information Act have revealed that Chancellor Gordon Brown ignored industry as well as Inland Revenue advice when deciding to cut tax relief for occupational and private pension funds. The documents reveal that the Chancellor was advised that pensioners could lose a fifth of their income as a result of tax changes, and that it was predicted that the value of pension funds would fall by up to 75million. He was warned that employers would have to contribute between 3bn and 10bn more a year to make up the difference, while pensioners would find their pensions shrinking and that some schemes could even be forced into insolvency. Policy makers in 1997 relied on a surplus in pensions funds. However this did not survive a stock market fall in the early 2000s. Consequently, news reports such as this attribute the current crisis in the UK pensions system to a failed ministerial gamble a decade ago.

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