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Treasury Loses Out As Pension Gap Narrows The Treasury is losing tax take as a result of company decisions to plug the big deficits in their pension funds, Watson Wyatt, the pension consultants, said yesterday. Employers' contributions to pension funds in the first quarter of this year rose by �7bn or 29 per cent, and employees' contributions rose �1.4bn or 9 per cent as they, too, were asked to increase their contributions in the final salary schemes that remained open. Overall, the two elements combined produced a 25 per cent rise in contributions compared with the same period last year as companies got to grips with deficits that the CBI employers' group calculates still stand at about �100bn. The trend of higher contributions was likely to continue, said Stephen Yeo, a senior consultant at Watson Wyatt, as more companies completed their three-yearly valuations and as local government later this year put firm values on the big deficits that council pension funds were known to be facing. One effect of higher contributions "will be to reduce corporation tax receipts", Mr Yeo said. "If company pension contributions rise by �10bn in a year, the lost revenue to the Exchequer is roughly equal to an extra penny on the rate of income tax for everyone." That would apply a squeeze on the Treasury's tax take when outside analysts such as the Institute of Fiscal Studies are already warning that the government may struggle to hit its targets for corporation tax revenue. Mr. Brown told MPs on Thursday that the Inland Revenue's projections of company taxation were more detailed and up to date than those available to outside analysts, so "we are in a better position to know where the projection for revenues is over the next several years". He added that income tax revenues were also rising with the return of big bonuses in the City. Meanwhile, Malcolm Wicks, the pensions minister, said pilot studies of the combined pension forecast - which gives employees and people with personal pensions a joint forecast of what they are likely to get from their private pension and the state combined - had gone well. Both employers and employees welcomed them, research on the pilots published yesterday showed. The study found, however, that during the period of the study few people actually increased their contributions as a result. Who Are We ? | About THISDAYOnLine.com | THISDAY People | Contact Us © Copyright 2000 Leaders & Company Limited

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