UK - Scrapping tax credits, which have stripped schemes of £24.5bn in the past seven years, has not had an impact on their funding, the government claims.
Lord McIntosh of Haringey (pictured) said stock market falls and increased life expectancy had hit schemes – not Chancellor Gordon Brown’s decision to abolish advanced corporation tax relief.
McIntosh was responding to Conservative Lord Peyton of Yeovil who said that scrapping tax credits had damaged “both the savings movement and the arrangements made for retirement by many pensioners”.
Fellow Conservative, Lord Higgins, told the debate on the Pensions Bill: “Is it not clear that the change in advanced corporation tax to which my noble friend referred was only the first in a series of actions by the chancellor that have added to the present crisis in provision?”
The National Association of Pension Funds agreed, reiterating calls for the tax credit to be restored – particularly at a time when schemes faced massive deficits.
A spokesman said: “You simply cannot deny that this has had a huge impact on schemes. After 1998 when the markets began to drop and they had lost almost £4bn a year, it became a huge factor.”
However, McIntosh said he did not think the government had done anything wrong: “The change was a redress of a distortion that has existed for some time and has not been a significant element in pension funds’ ability to meet their obligations in the years between then and now.”
He added: “There have, of course, been significant changes in the financing of pension funds, but those have been due much more to interest rate reductions, to the fall in the price of equities and, even more significantly, to increased life expectancy.”
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