New research: Pensions tax grab costs pensioners £225 billion
- Pension funds have lost between £150 billion and £225 billion as a result of the pension tax grab in the 1990s.
- Over 17,000 public sector pensioners now enjoy pension benefits worth a million pounds or more.
- The value of the Basic State Pension is down 20% since 1950.
- MPs and BBC staff pensions are kept secret.
With millions worried about the value of their pensions in the financial crisis, the TaxPayers' Alliance (TPA) today publishes a detailed report investigating the harm done to private pensions by Government tax grabs, the falling value of the basic state pension and the massive benefits enjoyed by thousands of public sector workers. The pension divide between the public and private sectors is growing, as private sector workers lose out and record numbers of their public sector peers now receive pension benefits worth millions of pounds.
The serious problems suffered in the UK pensions system are found to be due to political meddling and managerial incompetence on the part of inexperienced politicians, particularly with regard to decisions made for short-term political gain that have disregarded the long term needs of the pension system. The report recommends urgent reform, including reducing the unsustainable public sector pension scheme to a more manageable level.
The full report can be read here.
- Occupational pension schemes have lost between £150 and £225 billion in growth, at least, as a result of the abolition of ACT relief on pension funds in the 1990s.
- Partly as a result, the number of active members of private sector occupational schemes has fallen by 41 per cent in the past 12 years, with an even greater fall in defined benefit scheme members. Were this trend to continue, there would be no active members of private sector occupational schemes in 12 years’ time.
- The Basic State Pension is down 20 per cent or more from its 1950 level relative to earnings.
- There are now over 17,000 retired public sector employees with retirement benefits worth £1 million each, while unfunded public sector pension liabilities are estimated to exceed £1 trillion, over 70 per cent of GDP.
Shockingly, some public sector organisations, including Parliament and the BBC, refused to release details of how many MP and BBC pensioners have million-pound pension benefits, despite the fact that both organisations are likely to have large numbers of extremely well-rewarded retired staff.
Terry Arthur, author of the report and a Fellow of the Institute of Actuaries, said:
“Political management of the UK pensions system has failed to provide a decent retirement income for many people and has been a painful lesson in the limitations of government. The history of the state pension system has been littered with broken promises, while it is immediately apparent that the proposed NPSS could lead to lawsuits on a massive scale. The possibility that contributions may prove to have been worthless because they end up disqualifying the individual from pension credits or other benefits is just the tip of the iceberg.”
Corin Taylor, Research Director at the TaxPayers’ Alliance, said:
“The infamous tax raid on pension funds has been a major factor in the collapse of occupational pension provision in the private sector, while gold-plated public sector pensions have remained immune from necessary changes. It is not right for taxpayers to be subsidising million pound retirement benefits for the public sector elite while seeing the value of their own pensions plummet, or in many cases not having a pension at all.”
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