UK - Government mis-management of pensions policy has caused the value of occupational schemes to reduce by up to £225bn since the early 1990s, while the introduction of personal accounts could lead to legal action on a "massive scale", the TaxPayers' Alliance (TPA) has warned.
A report published by the organisation, entitled "The UK Pensions Crisis', claimed the reduction of advanced corporation tax (ACT) relief in 1993 by the then Conservative government, and the later abolition of the relief by the Labour government in 1997 has cost occupational schemes between £150-225bn, through "lower-than-otherwise dividends and growth".
It also suggested the loss of value has been partly responsible for the 41% decline in the number of active members of private sector occupational schemes in the last 12 years, while the number of active defined benefit (DB) scheme members has also dropped by 43% between 1995 and 2007.
As a result, the TaxPayers' Alliance claimed: "Were this trend to continue, there would be no active members of private sector occupational schemes in 12 years' time.
Authors of the report argue "urgent reform" of UK pensions is needed and this should include reducing the "unsustainable" public sector pension scheme - which has estimated liabilities of more than £1trn - to a more manageable level.
More importantly, the report´s authors argued some future changes, such as the introduction of personal accounts and auto-enrolment in 2012, will not necessarily benefit workers but could instead lead to large legal actions.
It stated: "It is immediately apparent that the proposed NPSS [personal accounts] could lead to lawsuits on a massive scale. The possibility that contributions may prove to have been worthless - because they end up disqualifying the individual from pension credits or other benefits - is just the tip of the iceberg. For many young people and their families, it is simply not sensible nor, indeed, feasible to devote scarce resources to future retirement."
The report suggested the new regime could lead to legal action as the scheme bears "an uncanny resemblance" to the personal pensions mis-selling scandal of the late 80s and early 90s when the introduction of contracting-out of SERPS was misused by pension providers and financial advisers to persuade people to move from defined benefit employer pension schemes into personal pensions.
The ensuing legal claims against advisers, banks and companies eventually led to compensation payments of at least £15bn, and additional legal and administration costs of over £5bn.
Instead, the report suggested reforms involving private pension pots (PPPs), which are modelled on individual savings accounts (ISAs) but with larger contribution limits and a "light regulatory touch', alongside a new system of means-tested benefits based on circumstances and irrespective of age.
Terry Arthur, author of the report and a Fellow of the Institute of Actuaries, said: "Political management of the UK pensions system has failed to provide a decent retirement income for many people and has been a painful lesson in the limitations of government. The history of the state pension system has been littered with broken promises, while it is immediately apparent that the proposed NPSS could lead to lawsuits on a massive scale."
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