The reversion to old-style “hit the rich” Labour politics isn’t quite what it seems.  Not only has Brown achieved his goal of taking more than 50% of the earnings of high earners, he’s also taken steps to ensure that anyone in the private sector is prevented from building up the level of pension enjoyed by Brown and his cronies in the public sector.

Brown will never be elected Prime Minister, but that won’t stop him drawing a pension of well in excess of £120K p.a. for the rest of his natural.  His cabinet colleagues won’t do quite as well, but fear not, they will be comfortably looked after on pensions of well over £50K p.a. minimum.

In the wider public sector, from firemen to schoolteachers, nurses to tax collectors, two-thirds final salary pensions, index-linked, are commonplace.  You’d have difficulty finding any middle-ranking personnel who at the end of a public sector career won’t be getting at least £25K p.a. index-linked as a pension – typically from age 60.  All paid for by taxpayers of the future.

But the private sector, that’s another story.  Many people in the private sector, particularly among the professional classes, are responsible for funding their own pensions from money-purchase schemes.  If you want £25K p.a. in the private sector, from age 60, with annuity rates the way they are you’d need well over £600K in your fund.  If you hope to compete with a cabinet minister, you’re looking at over £1.2m.  How do you accumulate such sums? 

You put aside income.  In the professions, if you’re successful, you might get to £150K p.a. plus, but you’re unlikely to do so until your 40’s at the earliest.  In all probability, you’ll have no more than 10 really good income years in which to build your pension pot – fewer if you plan to retire at 60.  And that only works if your pension fund doesn’t lose value, which of course they all have, between 30% and 40% in the past two years.

But now Brown has decided that high earners shouldn’t be entitled to the tax reliefs they’ve benefitted from previously.  So for many, the cost of building a fund has just increased by 25%. 

It’s said this only applies from next year – that’s not true. It applies from 22 April 2009, and if you’re a high earner, hoping to make a final fully tax deductible pension contribution this year, beware the small print.  You can only match your “regular” pension contributions or £20K if less.  The sting in the tail is that “regular” in Treasury-speak doesn’t mean “regular” in common parlance.  Single Premium contributions, according to Treasury mandarins, aren’t regular.  No, as far as they’re concerned, if you’re making fewer than 4 contributions per annum to a pension fund, you’re not making regular pension contributions at all.  Regularly making Single Premium payments, even of the same size year on year, doesn’t qualify you for making a similar tax-deductible Single Premium payment this year.  Shame Brown’s Boys didn’t tell us all about 10 years’ back.

Brown has form when it comes to pensions, so we shouldn’t be too surprised at his deliberate targeting of people in the private sector.  But he and his colleagues ought to wake up to the reality of the divided society he’s creating – the “haves” in the public sector whose gold-plated index-linked final salary pensions are paid by the “have nots” in the private sector.  You don’t often see the grey-hairs rioting, but this will be the final straw for many.