Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

BZWIM warns on pensions tax threat

Terence Wilkinson,Deputy City Editor
Monday 01 November 1993 00:02 GMT
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

BARCLAYS de Zoete Wedd Investment Management, one of the UK's top pension fund managers, has written to the finance directors of all FT-SE 100 companies warning them that a further tax on pension funds in the forthcoming Budget would have dire effects.

Alan Rubenstein, a BZWIM director, claims that a pension tax would tip some pension funds into deficit and force many companies to resume contributions. 'The effects on pension funds, their members and on companies could be little short of disastrous.'

Before the last Budget, pension funds were allowed to reclaim the full 25 per cent tax credit on payments of dividends by UK companies. The rate was reduced by Norman Lamont to 20 per cent, and there is concern that Kenneth Clarke may be tempted to abolish the right to reclaim a tax credit.

There was little public outcry at Mr Lamont's move, and while the Government is struggling to find ways of restraining its pounds 50bn annual borrowing requirement, investment funds have had an extremely buoyant year. The Institute of Fiscal Studies has calculated that a move to eliminate the tax credit would raise an extra pounds 3bn of revenue for the Government.

Mr Rubenstein calculates that ending the tax credit would knock 10 per cent off share price values because pension fund gross incomes would be reduced. The fall in shares would aggravate the effect on pension fund finances of lower incomes. In turn, this could lead many companies to abandon the use of final salary pension schemes, and the open-ended commitment to its members this implies, in favour of defined contribution schemes.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in