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New Pensioners Face Limited Festive Cheer as Stamp Duty Accounts for Two Thirds of Income in First Year of Retirement

20 December 2006

The drop in value of the average personal pension pot as a result of stamp duty on shares is equivalent to nearly two thirds, or 30 weeks, of a pensioner's gross income during their first year in retirement, according to analysis of industry data by Brewin Dolphin Securities, the UK's largest independent portfolio manager. It warns that all pension funds with investments in equities are penalised by this tax and it is an added disincentive to save for a pension.

Brewin Dolphin’s analysis follows an increase in the number of commentators calling for its abolition, including the London Stock Exchange and The Conservative Party. Stamp Duty on shares reduces the average person's pension pot by £8,000 1, or 59% of the average gross income that a retired person can expect to receive in their first year of retirement, £13,520. 2

Stamp Duty is charged every time shares are purchased in a UK company at a rate of 0.5 per cent of the value of the shares bought. The Treasury is forecasting that it will raise £3.6 billion from stamp duty in the current year, yet independent estimates show that abolishing the tax would boost investment by £3 billion and lift share prices by 10%. 3

Charlotte Black, Director of Corporate Affairs at Brewin Dolphin said,

"Not only is this figure shocking in itself, it brings the effect of stamp duty on shareholders into sharp relief. It deals a heavy blow on our retirement savings, which have already been weakened by the decision to remove the tax credit on pension funds in 1997. Scrapping stamp duty would reduce transaction costs and thereby provide a much needed boost to the value of our pensions.

"With public confidence in the pension system at rock bottom, abolishing stamp duty would help to win back consumers who have given pensions the cold shoulder. Other leading financial centres have either withdrawn the tax or impose a much lower rate than that of the UK. We should waste no time in following suit."

Notes to Editors:

  1. National Association of Pension Funds, http://www.napf.co.uk/download/sept2002.pdf
  2. Based on the weekly gross income of a recently retired single pensioner of £260 DWP - The Pensioners' Income Series 2004/5, http://www.dwp.gov.uk/asd/asd6/PI_series_0405.pdf
  3. London Stock Exchange, http://www.londonstockexchange.com/en-gb/about/Newsroom/Media+Resources/News+Reports/s1054.htm

For further information please contact:

Charlotte Black
Brewin Dolphin Securities
0845 213 3331

Patrick Evans / Alistair Kellie / Ewan Robertson
Citigate Dewe Rogerson
020 7638 9571