Over the coming months I believe another aspect of the recession will become apparent. Company pension schemes are bound to be stretched with the value and yields of investments down. There will be worrying valuation reports, showing large funding requirements, some of our largest pension schemes are for companies which are smaller than the pension schemes they sponsor. I hope that the Pensions’ Regulator will help these schemes as they work out recovery plans to make up for cash lost to the recession.
In November I asked the Work and Pensions’ Secretary of State James Purnell Parliamentary Question about pension scheme losses and how they are to be covered if companies go bust. I asked if an increase in the levy on pension schemes for the Pension Protection Fund was going to be put forward. He said No, but there must be some concern at how losses are to be made up if companies go out of business.
It’s a gloomy picture made worse by the Pension Raid by Gordon Brown in 1998, when he ended Dividend Tax Relief, taking £5 billion per annum out of pension schemes. For a time the effects of this were hidden by rises on the Stock Market up on a tidal wave of credit, but now as that tide recedes, we see washed up on the shore the debris caused by that Raid. How those schemes could use the billions of pounds taken from them now.