15 April 2010
The Manifestos - what will they do for pensions and
savings?
As one of the largest private client portfolio managers and
pension advisers in the UK, Brewin Dolphin has been growing
increasingly anxious about the state of Britain's diminishing
financial security in retirement. Consequently over the past
two years we have been raising our concerns at Government level,
highlighting the major issue of pension shortfall being faced by
many Britons. To demonstrate our ongoing commitment to this
major issue we recently launched the UK’s first pension
calculator at www.pensionstimebomb.com which enables individuals to calculate the impact on their pensions
of the removal of the tax credit on dividend income introduced in
the 1997 Budget. Within a week of launch the Pensions Calculator
received over 4,000 visitors who entered their pension details into
the calculator and found out for themselves the impact on their own
pension savings and how much more they will now need to save to
make up the shortfall, or indeed how much longer they may have to
work in order to achieve the pension pot they aspired to before the
tax change.
We will continue to raise awareness among investors about this
issue to ensure that they continue to challenge MPs and candidates
from all parties during the General Election about Britain's
dwindling pensions. This week's Manifestos have to some
extent addressed the issue as we have seen the three main parties
outline how they propose to tackle Britain’s Pension
Timebomb. However it is still early days and some of
their election promises simply do not stack up. We want to
see the right policy measures introduced to restore individuals'
faith in saving for retirement, and we want the next Government to
stick to the policy throughout the next Parliament – to
create more certainty and confidence for savers and investors and
support the re emergence of a savings culture.
• The Labour Manifesto clearly states
that the party 'will continue to make pension saving more
attractive for individuals through favourable tax treatment' but we are concerned that many Britons now face a Pensions time
bomb - an ageing population with diminishing financial security in
retirement - as a result of the removal of the tax credit on
dividend income by Labour in their 1997 Budget. The Labour
Manifesto needs more clarity about what the Party means by
'favourable tax treatment', as other than to re state its
commitment to NEST*, we can see nothing new. (*National
Employment Savings Trust – previously known as Pension
Accounts)
• Brewin Dolphin welcomes The
Conservative's aspiration to restore the value of dividend
tax credits - "When resources allow, our ambition is to start
to reverse the effects of the abolition of the dividend tax credit
for pension funds." It is also reassuring to hear that
an incoming Conservative government would work with the trade
unions, businesses and others to address the growing disparity
between public sector pensions and private sector pensions, while
protecting accrued rights. They also pledge to end the
annuity at 75 requirement; to stop the spread of means testing and
to look at how they can simplify the rules and regulations round
pensions, which would he hugely welcome by both savers and their
advisers. However, we do call on the Conservatives to have more
clarity about how they would encourage wider savings and ISAs in
particular.
• On pensions, the Liberal
Democrats said they would immediately restore the link
between the basic state pension and earnings, and increase the
state pension annually by whichever was the higher of growth in
earnings or growth in prices or 2.5%. They would also scrap the age
75 compulsory annuity rule and give people ‘greater
flexibility in accessing part of their personal pension fund early,
for example to help in times of financial hardship.’ However, the proposal we are most concerned about is to reduce tax
relief for all pension contributions to the basic rate –
removing incentives for many tax payers to save into pensions.
Jamie Matheson, Brewin Dolphin’s Executive
Chairman said “Britain is effectively sitting on a pension’s
timebomb – an ageing population with diminishing
financial security in retirement. The long term costs the
country will bear as a result of Britain’s pension deficit
will dwarf the estimated £5 billion a year raised by
abolishing the dividend tax credit in 1997. ”
Richard Harwood, Divisional Director of Pensions at
Brewin Dolphin said "The past 20 years have seen it become
easier to borrow money than to save; this spend now pay later
approach combined with the reliance on residential property, has
had a desperate effect on pension savings at just the wrong time in
the cycle. The next Government urgently needs to address
this.”
Charlotte Black Head of Corporate Affairs at Brewin
Dolphin said “By the end of last year nine out ten
final salary pension schemes had been wound up . We are
anxious to raise awareness among investors and to encourage them to
challenge MPs and candidates from all parties during this Election
campaign, about their manifesto proposals to tackle Britain’s Pension Timebomb and
then to stick to the policy throughout the next Parliament –
to give us some certainty and confidence about the advice we give
to investors.”
For further information please contact Charlotte Black, Head of
Corporate Affairs on 0845 213 3331 or Richard Harwood, Divisional
Director, Financial Planning on 0845 213 4773