The younger and lower-paid may shrug off the loss on the grounds that state benefits will, after all, provide for their old age. Others may consider pensions are no longer the best way to secure funds for retirement: thus an important plank of government philosophy – ensuring that everybody has a second-tier pension – will founder.The Government has an opportunity to rethink. Some, unable to pay more, will accept a lower pension – up to 20 per cent lower on some industry estimates – when they retire That is an enormous annual “tax” burden. Many in personal schemes will merely increase their contributions in order to stand still. They will, in effect, be the ones for whom the Chancellor broke his promise not to raise taxes.

There is no guaranteed final pension; there is no employer to pick up the tab. For those people, what they pay in is what they get out, plus whatever their contributions earn. Either they pay in more now (an average pounds 190 a year, the industry says) or they will, as a result of the tax credit changes, take out 15-20 per cent less when they retire.The full consequences of the Government’s selective raid may take time to emerge. But the concept of a fund in surplus doesn’t arise for those in individual schemes (both personal pensions or company money-purchase schemes).

These are the new arrangements that have been urged on Britain’s increasingly insecure work- force; indeed under the last government, urged even on those formerly in secure schemes. It is, we were told, the modern response to modern ways of working. It is true that for those in large company schemes where a final pension is guaranteed (a dwindling proportion of the work- force), the funds or employers can absorb the loss. They do not enjoy higher-rate tax relief on their pension contributions, and they have more years in which to suffer from the shortfall created by the Chancellor’s abolition of tax credits to pension funds.
The Treasury argues that there are billions of pounds sloshing around in pension funds and that the funds can withstand the loss of tax credits without passing on the effects to pensioners; that the current system has led to a bias against investment; and, witheringly, that “there is no question that in the long term and the medium term it will be good for companies and it will be good for pensioners” Saying it doesn’t make it so, unfortunately. Worst affected are the seven million personal pension holders and up to two million members of company money-purchase schemes And worst affected of these are the young and lower-paid. Contrary to early reactions to last week’s Budget, Gordon Brown has not squared the circle He has not magicked revenue from nowhere.