Brown's pensions raid has also cost savers

July 02, 2007 10:19 AM

New calculations by Mike Warburton and Maurice Fitzpatrick at Grant Thornton are yet more evidence of the damage that has been done by Gordon Brown's removal of tax credits on dividends. They show that an estimated three million investors in personal equity plans (PEPs) and equity-based individual savings accounts (ISAs) have lost an average of £2,000 each, or £6 billion in total, over the last eight years.


The reason for this is very simple. Until 1999 investors could reclaim 20 per cent of the tax that they were due to pay on dividends generated from equity investments within PEPs. In 1999 Gordon Brown replaced PEPs with ISAs and halved the benefit, allowing investors to reclaim a maximum of 10 per cent. In April 2004 he removed that benefit altogether.


The £6 billion figure includes not only the direct reduction in income, but also the knock-on effect of the loss in investment returns had that extra money remained in the PEP or ISA. So not only has Gordon Brown whacked pensions, he has also damaged non-pensions saving.


And the result? The savings ratio has dropped from 10 per cent in 1997 to only 2.1 per cent, the lowest level in almost 50 years.  Not something for Gordon Brown to shout about. 

New calculations by Mike Warburton and Maurice Fitzpatrick at Grant Thornton are yet more evidence of the damage that has been done by Gordon Brown's removal of tax credits on dividends. They show that an estimated three million investors in personal equity plans (PEPs) and equity-based individual savings accounts (ISAs) have lost an average of £2,000 each, or £6 billion in total, over the last eight years.


The reason for this is very simple. Until 1999 investors could reclaim 20 per cent of the tax that they were due to pay on dividends generated from equity investments within PEPs. In 1999 Gordon Brown replaced PEPs with ISAs and halved the benefit, allowing investors to reclaim a maximum of 10 per cent. In April 2004 he removed that benefit altogether.


The £6 billion figure includes not only the direct reduction in income, but also the knock-on effect of the loss in investment returns had that extra money remained in the PEP or ISA. So not only has Gordon Brown whacked pensions, he has also damaged non-pensions saving.


And the result? The savings ratio has dropped from 10 per cent in 1997 to only 2.1 per cent, the lowest level in almost 50 years.  Not something for Gordon Brown to shout about. 

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