17th April 2007

The effect of Gordon Brown’s pension raid of 1997.

Brewin Dolphin Securities has just launched a Pension Tax Calculator designed to assist in assessing the effect of Gordon Brown’s pension raid of 1997.

The calculator compares the projected value of an individual's pension fund at retirement to what it would have been had the Government not abolished Advanced Corporation Tax credits for pensions, savings and charities in 1997.

The calculator also estimates the required increase in contributions from today and the number of additional months to be worked in order to make up for the shortfall.

According to examples from Brewin Dolphin's Pension Tax Calculator, a 40 year old man who is married with two children could end up having to work 22 months longer to make up his pensions shortfall or increase his total contributions by 25 per cent from now on. A single mother in her late forties would have to work 15 months longer or increase her net monthly contributions by 27 per cent in order to make up the difference.

Money Marketing reports that Brewin Dolphin conducted some public research (TNS) in February of this year which showed that 41 per cent (19 million) of British adults had been unaware of the impact of this move on their pensions for the last ten years. The findings also showed that although 19 per cent of Britons were aware that the Chancellor had removed the tax credit, they had no idea of the impact on their pension fund. This means that 60 per cent of British people have made no revisions in their pension arrangements in the ten years since ACT credits were abolished.

Brewin Dolphin Securities director of corporate affairs Charlotte Black says: "Our Pension Tax Calculator clearly demonstrates that it was quite wrong for the Treasury to claim that the abolition of tax credits on pensions would have no impact on their savings. If it had been acknowledged at the time, investors would only have had to make a very small adjustment to their contributions to make up the shortfall. But ten years on the necessary increase is significant, which also clearly demonstrates the fact that the earlier you invest in pensions the better. We hope that our calculator will encourage people to take action."