Thursday, 8 October 2009

Reversing the 'tax raid' on pensions

I dunno how much we should read into this, given the total abscence of detail. But in general it does suggest again that the Tories are more interested in posturing than serious pension reform.

First up, what is the policy meant to achieve? It cannot, for example, repair the damage done to defined benefit schemes, finance directors will not suddenly re-open them because they have a bit more investment income. It will therefore marginally increase the funding position of these schemes. This is clearly not a bad thing, but not a particularly exciting objective.

Equally it will provide a bit more income for the many more people who are now in DC schemes. That may or may not make a difference. A bit more dividend income certainly won't offset the sort of falls we saw in share prices in recent years. Again obviously better to have than not, but not really a big contribution to the pensions problem IMO.

Secondly, who is going to benefit? If pension funds get a few extra quid, it benefits the members of these schemes. But the stats out there suggest that membership is skewed towards full-time male employees (and union members...!). Until Personal Accounts kick in this will remain the case, and the effect will therefore be to give a bit more money to those people already in pension schemes over those that are not. Is this really a sensible use of money if we want to spend more on pensions? Would it not be better to simply spend a bit more on the state pension, since we know everyone will get it?


tory boys never grow up said...

And of course it will do nothing to address the ridiculous dividend policies that many companies (and especially the banks) have adopted. Funny the Tories view that you put aside money in the good times applies only to government and not the corporate sector.

Calvin Allen said...

Agreed, Tom.

But I guess the issue for the Tories is that it helps keeps the public eye spotlight on Gordon Brown as the man whose raid on pension funds started the decline. Nonsense, as we know. But whether or not they'd actually do anything about it, given the opportunity, is anyone's guess.

In the meantime, back to the rebuttal trenches!