Gordon Brown on Pensions
TL;DR
Gordon Brown's 1997 Budget move to abolish pension fund tax credits is widely cited as damaging defined benefit schemes.
Key Points
He abolished tax credits paid to pension funds and companies in his March 1997 Budget statement.
This action is frequently cited as a major contributor to the decline of gold-plated Defined Benefit schemes.
His 1997 move was reportedly made despite internal Treasury warnings about placing an added burden on employers.
Summary
Gordon Brown's position regarding pensions is primarily historical, focusing on the significant impact of a policy decision made when he was Chancellor of the Exchequer. In his March 1997 Budget, he pressed ahead with the abolition of tax credits paid to pension funds and companies on dividend income. This action was taken despite warnings from Treasury officials that it could place an added burden on employers and hasten the demise of final salary pension schemes. The policy was presented as a structural reform to encourage corporate reinvestment rather than profit distribution, but it breached the tax-exempt status of UK pension savings for the first time.
This 1997 decision is frequently blamed by commentators for dealing a 'death blow' to defined benefit (DB) pension schemes, as it removed substantial value from these funds, forcing employers to increase contributions or close schemes to new members. Critics argue that while other factors contributed to the decline of DB pensions, the withdrawal of this tax break was a major, damaging catalyst. Although there has been later parliamentary debate concerning state pension policy, such as the introduction of the Triple Lock, Brown's most cited direct involvement concerns this pre-2007 intervention in private pensions.
Key Quotes
“British companies have invested too little and too late in the economic cycle.”
Frequently Asked Questions
Gordon Brown's most significant action related to pensions occurred in his 1997 Budget as Chancellor. He abolished the tax credit paid to pension funds on dividends.
His decision to remove the tax credit is widely blamed for significantly harming the viability of defined benefit occupational pension schemes. This is viewed as a major, damaging intervention in private pensions.
The move impacted both defined benefit and defined contribution schemes by reducing the returns on their investments. However, the criticism is most often directed at the impact on employer-sponsored final salary schemes.
Sources7
The day the Defined Benefit pension scheme died?
Pensions tax relief changes – legacy of Gordon Brown's pension raid should be a warning to the new Chancellor
Gordon Brown ruined retirement for a generation
Lessons for the government's 'revived' Pensions Commission
Brown defied warnings over pension tax relief
How big was Gordon Brown's raid on pensions?
State Pension Triple Lock - Hansard - UK Parliament
* This is not an exhaustive list of sources.