Helen Nugent

Dwindling pension funds plugged by workers’ wages

A decade ago, while working for a national newspaper, I forced the then Labour government to release documents under the Freedom of Information Act. The papers showed that Gordon Brown defied repeated warnings from his own officials about the potentially devastating impact of this £5 billion-a-year raid on pension funds and went ahead with it regardless.

Brown announced the scrapping of tax relief on dividends paid into pension funds in his first Budget in 1997 at a time when many funds were in surplus. It was the single biggest change to the system in a generation. By the time my story was published, the country’s savers had been deprived of at least £100 billion.

It was one of those stories which, in journalism parlance, ‘has legs’. The fallout continued for weeks with the Labour government blaming the CBI, the CBI hitting back saying that was nonsense, the then Shadow Chancellor George Osborne calling for Gordon Brown’s resignation and saying he should be blocked from becoming Prime Minister. Everyone weighed in.

Ten years later and the fallout continues. Pension funds are in trouble. Last year, UK businesses spent around £24 billion trying to plug their pension funds’ deficit, with Royal Bank of Scotland, BT, Tesco, Shell and Unilever among the companies ploughing funds into the schemes. This is £19 billion more than would have been the case if pre-2000 deficit levels had continued, and the current deficit of all defined benefit schemes is thought to amount to approximately £500 billion.

That’s according to the Resolution Foundation. The new research, carried out by Brian Bell at King’s College London, also found that an average 10 per cent of the money that has been paid into defined benefit schemes over the past 16 years has been funded by suppressing wages.

Already a subscriber? Log in

Keep reading with a free trial

Subscribe and get your first month of online and app access for free. After that it’s just £1 a week.

There’s no commitment, you can cancel any time.

Or

Unlock more articles

REGISTER

Comments

Don't miss out

Join the conversation with other Spectator readers. Subscribe to leave a comment.

Already a subscriber? Log in