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The
Compulsory
Annuity
Purchase
Protest
Alliance
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CITYFORUM ROUND TABLE PENSIONS IN 2002 The
Inland Revenue And Pensions, Ms Paula Diggle, Head of Savings & Pension
Policy, Inland
Revenue.
Ms
Diggle is on secondment from the Treasury and is responsible for policy
on taxation of pensions both DB and DC, non-pension schemes such as ISA's
etc. and tax deduction at source for interest.
As
the first speaker, she emphasised the Treasury view that pensions are
for income and they are adamant that tax-relieved funds will not be used
as a tax-free money box. Pay tax and use an ISA instead was one of her
messages.
The
IR/Treasury say that an annuity is the only known way of pooling risk
and the pricing of these is 'tight'. As for relaxing the age 75 rule,
she argued that mortality drag makes this 'uneconomic' for a pensioner.
They
want to introduce more open-market competition with the FSA publishing
a 'live' annuity league table.
As
per the 'consultation' document, they are asking for ideas for new annuities,
e.g. a 'limited period annuity'.
The
Current Arrangements On Annuities And Proposals For Reform, Dr. Oonagh
McDonald.
Dr.
McDonald was very scathing about public sector indexed-pensions and the
non-consideration of total annuity compulsion. She said that pensions
were in crisis due to the accelerating withdrawals of final-salary schemes
in the private sector. She also talked about the Choices report and the
Curry Bill.
Lessons
From Abroad Investment, Flexibility, Stability, Tax Issues, Mr Gordon
Boronow, Deputy
C.E.O., Skandia, United States.
He
talked about their system. Their IRA account has a max. limit of only
$3000 pa and 401K with employer's contribution as well $11,000 max. pa
so they have less tax-relieved pensions than us. They must vest by 70.5
years. They must take a similar minimum to us from their funds but no
restrictions on taking the whole lot if you want to. On death but with
spouse exemptions, residual funds subject to estate tax only.
You
are permitted to withdraw capital at any time but with a 10% penalty or
tax-free if you need the money as a first-time buyer or for disability.
Because
of Enron, they are bringing in new legislation that no pension fund can
have more than 20% in any one stock.
Foreign
Insights Into Pensions Issues, Mr John F. Chown, Partner, Chown Dewhurst
LLP, Member
IFSL (formerly British Invisibles) Pensions Group
John
Chown was also scathing of the IR attitude to annuity compulsion (as was
everybody) and was also critical of the Chancellor's raid on pension funds
amounting to £5.6 billion per year in stealth tax.
He
produced some interesting figures showing that gilts purchased by a pool
of 75-year olds should achieve 13% whereas an annuity pays out only 11%.
Also
produced data showing that a harmonised EU budget/taxation would be a
disaster for the UK due to their unfunded pensions (especially France)
amounting to minus 8.9% of our GDP. .
He
lectures to undeveloped countries - tells them: "Whatever you do,
don't copy ours!"
Carl
Emmerson of the Institute of Fiscal Studies.
Carl
gave a presentation of pensions vs ISAs - Lots of statistics on slides
with masses of figures. Without a copy of his paper, it was impossible
to comment. He basically said pensions were 'better' because of the tax
relief.
Guest
Speaker was Frank Field MP.
Frank
said the Government must launch a life-boat operation to 'save' defined-benefit
schemes and was critical of the new accounting standard - pension schemes
should not be measured against short-term market fluctuations.
He
said ACT taxes must be phased back in to make DB funds sustainable again
and that funds should be allowed to have more than a 5% surplus year-on-year
as before. Pensions to be based on average pay rather than final-salary,
ie. more like a DC scheme but less risk to the individual.
He
discussed his own scheme with a compulsory second pension but funded.
Reckons MIG should be price not earnings-aligned.
CAPPA put it to him that rather than a second pension, the primary state pension should be funded to MIG to save all the means-testing. He said not affordable as an increasing number of retirees had not paid enough. |
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CAPPA
FORUM
As
an opening topic, we quote from Mr Stewart Steven in The Financial Mail
on Sunday. It is upon this Human Rights Act 1998 that CAPPA bases
it's fight for Justice.
When
the great Lord Hailsham complained about the British system of Parliamentary
democracy producing a series of 'elected dictatorships' he was arguing
for a written Constitution, a Bill of Rights.
I
agreed with him then and I do so now. The great weakness of our
Parliamentary democracy is that it provides insufficient protection for
the individual against the might of the State.
The
argument that Parliament is the voice of the people is a fairy tale.
Parliament legislates in a fashion which neither we nor it always understands.
Laws are forced through the division lobbies. often with a minimum of
scrutiny or debate. All of us from time to time are astonished to discover
some new law of which we were wholly unaware suddenly affecting, often
adversely, our lives.
No
More. Parliament will have to establish a procedure to ensure that
every new piece of legislation can pass a basic 'human rights test' to
see if it stands up against those standards of liberty and fairness which
have characterised the best of our traditions.
People
who feel their human rights have been trampled upon will be able to go
to the courts and demand that their case be heard.
CAPPA
represents thousands of people whose human rights are still being trampled
upon & believes that the Human Rights Acts prohibit any discrimination
against people on the basis of their age.
Article
1 of the first Protocol ensures the peaceful enjoyment of people's possessions.
This includes one's hard saved pension funds. They may not be arbitrarily
wrenched away, handed over to the grim reaper of an annuity provider,
who takes all on death.
The
Tories and LibDems have abolition of Compulsory Annuity Purchase on their
agenda and it was in their election manifestos. The Labour party recently
agreed to introduce a "Code of Practice" banning age discrimination.
However,
voices in Government postulate that if they let people have access to
their pension funds, they would fritter it away and fall back on the State
for their welfare. This is not only inaccurate and paternalistic but has
nothing whatsoever to do with people scrimping and saving for their future
pension.
Prudent
people, who care about providing for the future, have a horror of being
forced to go cap in hand through demeaning, bureaucratic processes for
help. Particularly as they never wanted this anyway, and if they could
keep their pension funds intact, would never become a charge on the State.
Article
18 limits the use of restrictions on rights. These may not be applied
for ANY purpose other than those for which they have been prescribed.
Thus the last specious argument in support of inertia is blasted away.
But
all this takes time. Every day that passes, whilst politicians make their
grindingly slow progress to Pensions Justice, some of the 600,000 people
with pension funds arrive at their 75th birthday. Unless some enlightened
minister listens to the voice of the people and acts swiftly, what the
great-great-grandfathers of Parliament gave, the Courts will take away.
CAPPA'S
membership is now over 1,500 strong & growing fast.
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