| having paid into a pension plan (Scottish Widows I may add) your comment regarding why the companies did not gross up their payments” sounds great on a bulletin board like this. In reality, you pay into the plan, and the provider, Scottish Widows in this case, manages the fund. So now you are blaming the companies who were selected by Scottish Widows for not increasing dividends because ACT was no longer due? I think you need to revisit your logic. Even if they had paid dividends grossed up, then what about the people NOT in a plan, but ordinary shareholders. Do they get the grossed up or not?
The fact is, that what was a pensions benefit, was taken away by Brown, and now we see just how large the benefit was to the treasury. And yes, pensioners like me did suffer. So please, less of the smokescreen, Brown did the dirty on many pensioners and knowingly so.
As ever, it is important to separate out different kinds of pension scheme, and to consider them separately
For a company pension scheme, normally both employee and employer pay in to that scheme. The money contributed is supposed to be ring fenced (see Robert Maxwell's history on that) so that it is not vulnerable to company failure etc. As was noted above, the size of the scheme was limited too, to prevent companies using it to evade corporation tax by converting what was in reality profit into the untaxable pension contributions. The pension scheme then invests that money in order to provide a return on the money and ideally that will at last keep pace with inflation in order to preserve the beneficiaries' benefits. That is the essence of a defined benefits scheme, in fact.
A private pension such as you describe is no different in principle: what is missing is the employer's contribution, and so they are never going to be as good. But in addition, such schemes must proved the profit for a private scheme out of the contributions: and this is not true of a company scheme, for there is no profit to be extracted from such an arrangement: or at least not necessarily
A pension scheme makes investment choices. For every such scheme there is a tension between the wishes of the beneficiaries (which is generally for some certainty and security, even at the expense of bigger returns) and the wishes of the scheme itself (which is more focused on profit and high returns) The balance to be struck shifts and we see the same thing with banks. At some periods they are cautious and they invest in gilts and other very safe investments: at others they take bigger risks in the hope of bigger returns.
Pensions were opened up to the competition agenda during the course of the plutocratic coup: as with everything else the nantra was that private companies would achieve better results just because they were private, as was the mantra of the day. This was shown later to be wrong: that was what the pensions mis-selling scandal was all about. But that climate had wider consequences as well: because as a plethora of instruments became available, so the more cautious schemes were forced, through the mechanism of competition, to adopt the new wisdom: again as with banks.
Pension trustees shifted investment out of boring old gilts and stuff and into higher performing companies: a great many of which were not traditional manufacturing companies, but were financial services: because for a long time those were performing best. So pension fund money went into assets such as mortgages, which were held to be secure (because asset backed) but which were giving great dividends. Only the assets did not exist.
All dividends were subject to ACT. That is, they were paid net of basic rate income tax. The company paid the net dividend to the shareholder and the balance went to the treasury. The shareholder, if not liable to pay income tax, then reclaimed that tax from the treasury. So for Scottish Widows, as with all other shareholders, their dividends were received net of the tax. When ACT was abolished the tax was not paid and therefore the non tax payer (which included pension funds) could not claim it back.
You ask if there is a difference between the treatment of funds and ordinary shareholders in how the dividends are paid before and after: the answer is no. All dividends, broadly speaking, were subject to ACT before the change, and not afterwards.
But the money ended up in the companies: they used to treat this much the same as PAYE, only for dividend income: when ACT was abolished it became more like the tax on small businesses rather than employers. Dividends received were income taxed at source before the change: and were paid untaxed afterwards. So they should have increased in line with that fact and if they did not the company was the winner: and also gained from the fact that they were not acting as tax collectors on dividends, as they do with PAYE: so that should have cut their costs as well
The fall in the receipts of pension funds did not vanish: it was retained by the companies and not passed on. And I certainly do blame the companies for this: though I think it was eminently predictable. Brown was culpable because he honestly (I think) believed the propaganda of the business lobby: I make no excuses for him with that. But the implication of a "pensions raid" narrative is that the money ended up in the treasury: it didn't. He cut corporation tax at the same time, in the hope that the companies would not act as they did: but it didn't work. They kept the money, just as the banks have retained the cheap money advanced by the treasury in order to encourage lending to small business: they repaired their balance sheets with that money and continued on their merry way with bigger profits and bigger bonuses. Twas ever thus. Yes Brown should have known: but they told him and the rest of us we are all on the same side. In a pig's eye.
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