Despite proving as short lived a Prime Minister as can be recently recalled, the true extent of Gordon Brown’s effect on the lives of the working man can be traced back to 1997 when he was chancellor.
It has now been revealed exactly how much Gordon Brown single handedly decimated final salary schemes to the point of no return, when he initiated the scrapping of tax relief on dividends from company pension funds.
The move fuelled the closure of many final salary schemes as they were simply unaffordable for businesses. In 1997 the amount of private sector employees with a defined benefit pension stood at 5 million. Today the figure has decreased to an astonishing 1.7 million.
Criticism
In the process of raiding the pension pots, the government has made in excess of £18 billion at £7 billion a year. The move was widely criticised by Tories, and George Osborne promised to address the situation and reverse the reforms in his 2009 Budget. However since then, it has all gone very quiet.
The figures were published last week on the OBR website with no real fanfare, perhaps unsurprisingly. In 1997 34 percent of all staff within the private sector held a defined benefit scheme, today that figure sits at 8 percent. This equates to 1 person in twelve.
Since the sweeping reform which has been referred to as a ‘stealth tax’, many UK residents face having to work for longer, sacrificing the lifestyle they have become accustomed to or saved for, and in the worst case scenarios are faced with a life on the breadline.
Brown said in 1997 that ‘Pension funds are in surplus and many companies seem to be enjoying pension holidays’, going on to claim that it was ‘the right time to undertake a long-needed reform’.
Nobody could have foreseen the future deficit scenario would get to the stage it has now, and although the Tories have begun reforms in relation to how pension holders can access their funds, the deficit hasn’t really been broached yet.
As of April 2015, the reforms relating to pensions will mean that scheme holders will be able to decide how they use the funds they have with far more flexibility and freedom.
About John Cassidy
