UK – The government needs to introduce new tax incentives in this year’s budget to compensate for the removal of the tax credits on dividend payments that generated £3bn (€4.9bn) in extra revenue for pension funds, says Digby Jones, director general of the Confederation of British Industry (CBI).
Writing in the Financial Times, Jones warns that this is the main way to avoid further erosion of the DB market. His warning echoes the view of Ken Jackson, leader of the UK’s second largest union, Amicus, who said that the government’s “raid” on pension schemes in 1997 had led to the current wave of DB scheme closures.
Elsewhere, Jones believes that FRS17, the new accounting standard, needs modification to allow longer term views of a fund’s liabilities to be taken into account. “Most UK company pension schemes, are heavily invested in volatile equities and a shortfall in one year could easily turn into a surplus the next,” he says.
Jones says that the government’s decision to replace the minimum funding requirement is welcome but again the government needs to ensure the reforms are implemented smoothly. “There is a clear need for interim relief measures in the budget,” he says.
The article coincides with news that the £550m George Wimpey staff pension scheme is closing its established DB plan to new employees. “Unfortunately, as with many other schemes, we have been severely affected by the introduction of FRS17 which revealed a £57m liability on our balance sheet,” says a spokeswoman.