The Liberal Democrats have accused the new Prime Minister, Gordon Brown, of keeping £11billion from workers who elect out of the second state pension in favour of their own pension arrangements.
They claim that the Government would gain this money over five years by capping the rebate investors receive to 5.3 per cent. Pension spokesman for the Liberal Democrat David Laws commented it was ‘another massive stealth tax, further undermining private pensions’. The Department for Work and Pensions has dismissed this claim as nonsense.
Our view
Contracting out pensions have been available for nearly 30 years, you can hardly call this a ‘stealth tax’. It is common knowledge that many people are advisable to contract back in. Certainly, this has been the advice offered by most financial advisers for many years. The ‘con’ is company pension schemes using contracting out rebates to supplement the pension benefits offered by their scheme.