This week’s decision by the Prime Minister to call an early General Election on 8 June this year took us all by surprise.
Most commentators are suggesting that the election will be dominated by Brexit and the future of the United Kingdom outside the European Union.
But there are many other domestic issues that the election campaign will also throw into focus. Pensions are likely to feature in a number of different respects.
The termination of the parliament will bring to an end to the very restrictive commitment that former prime minister David Cameron gave that there would be no further increases in tax, national insurance or VAT during the course of this current parliament. This opens the door for changes being made to pension tax reliefs and allowances. A cash-strapped chancellor looking to reduce the nation’s deficit might see this as an opportunity in his autumn budget to make savings by introducing a single, uniform rate of tax-relief for all – say at 30 per cent in place of the present 20, 40 and 45 per cent rates– and a reduced annual allowance of £30, 000 or less to further limit the amount of tax-relief being paid out. This may not be as injurious to pension saving as it sounds given that ultimately it may lead to the lifetime allowance being abolished and/or the high earners’ annual allowance taper similarly disbanded.
It will be interesting to see whether the Conservative election manifesto makes any reference to their plans in regard to tax or even resurrects the possibility of increasing self-employed workers’ NICs which they made an early U-turn on following their last budget.
In relation to the state pension the Conservatives may feel bold enough if they feel sufficiently confident of winning a largish majority to scrap what was supposed to be the temporary uprating arrangement of the triple-lock – and replace it from 2020 with a link to rises in average earnings. They will be wary, of course, of losing some of the grey vote bearing in mind that Labour has already committed itself to renewing the lock, should they be elected, until 2025.
- State pension ages could also come under the microscope as part of the election. The Conservative government is due to respond to the recent Cridland Report next month (May) but may decide to indicate their intentions in relation to further age rises in their forthcoming manifesto instead. Although not recommended in the Cridland final report there is still the possibility of moving away from a single state pension age and having a more flexible arrangement in its place.
- The WASPI campaign will doubtless gather momentum during the campaign with Labour undertaking to offer the worst affected women some form of (largely unspecified) compensation. The Conservatives are adamant, however, that some major concessions were made in 2011 to the accelerated programme of state pension age rises and they cannot and will not go further. WASPI’s wish to have either all their state pension entitlements backdated to age 60 or some interim payments made from the same age point is clearly too expensive for any government to contemplate and probably the most they can hope for is a reduction of the minimum age pension credit threshold to help the worst affected – a suggestion made previously by Labour but rejected by WASPI at the time.
- Auto-enrolment is currently under review but to the disappointment of many the level of minimum contributions is excluded from the review. Hopefully all the political parties will announce how they would look to increase the levels, by how much and from when. There is general agreement within the pensions industry that current minimum contributions are highly unlikely to deliver the sort of pension income that most workers would expect and need and must be increased as soon as possible, preferably at or shortly after the end of the phasing-in programme in 2019.