As the countdown to the general election begins, despite the odd leak and potential U-turn, we take a look at the policies of the main parties on key pension and long term savings issues.
The Triple Lock
The level of future increases to the State Pension looms large in the main parties’ manifestos. Despite introducing the triple lock in 2010, as part of the coalition government, the Conservatives will no longer keep it after 2020. Instead, a new double lock will be introduced whereby the State Pension will rise each year by the higher of consumer prices inflation or average earnings.
Labour, the Liberal Democrats, UKIP, the SNP and Plaid Cymru, on the other hand, are all promising to keep the triple-lock, at least that is, in the case of Labour and the Liberal democrats, until the end of the next parliament.
State Pension Age
From 2019, the state pension age will start to increase gradually for both men and women, equalising at age 66 by 2020. Under the Conservative party, further rises are due to occur, raising the state pension age from 66 to 67 between 2026 and 2028.
In their manifesto, the Conservatives have pledged to “link the state pension age to life expectancy” but do not spell out exactly how this will be done. Despite this, whilst in Government, the Conservatives did appoint former CBI director-general John Cridland to independently review the state pension age beyond 2028. However, any decision as to whether or not to act on his recommendation to increase it further from age 67 to 68 has been put on hold until after the election.
Labour’s policy is quite different. Although they will maintain the rise to age 66 at 2020, they will scrap any future increases to the state pension age. Instead, they plan to review state pension ages to specifically look at developing a flexible retirement policy to reflect not only the variations in life expectancy but also the contributions made and the type of work carried out by individuals throughout their working life.
Labour’s manifesto also raises the subject of women born in the 1950s who have been hit hard by the rise in their state pension age, many of whom have had to wait an extra 18 months to receive their state pension. In fact, the Labour party’s manifesto states that the affected women deserve “some kind of compensation for their losses”. The SNP is also looking at different options of awarding compensation to the women concerned and since pension policy is not devolved they will be able to have a say on this issue at Westminster.
According to UKIP, the raised retirement age for women has been “hugely unpopular”. Although they do not suggest any compensation for the affected women, UKIP does propose to introduce a flexible state pension window. The idea is that everyone will be able to choose to retire earlier if they want, with a slightly lower state pension, or work longer for a slightly higher pension. UKIP will also allow women to retire on this basis at 60, if they so wish.
When it comes to private pensions the Conservatives want to increase the powers of both the Pension Regulator and the Pension Protection Fund in an attempt to protect pension savers from “unscrupulous business owners”. They also want to ensure that the Pension Regulator has sufficient powers to stop mergers, takeovers or large financial commitments that threaten the solvency of an employer’s pension scheme by being able to issue punitive fines, for those found to have wilfully left a pension scheme under-resourced, and disqualify the company directors in question. The Conservatives will also consider introducing a new criminal offence for company directors who deliberately or recklessly put at risk the ability of a pension scheme to meet its obligations.
Labour will also look to amend the takeover regime to ensure that businesses identified as being “systemically important” have a clear plan in place to protect workers and pensioners when a company is taken over.
The Labour manifesto also focuses on workplace pensions. They want to clamp down on what they perceive to be unfair pension charges and hidden fees in order to help develop more efficient pension funds.
The Conservatives and SNP are keen to support the expansion of auto-enrolment in workplace pensions and extend to it to the self-employed.
Although the Conservative and Labour manifestos are both largely silent on pensions tax relief, the Liberal Democrats’ idea is to introduce a single rate of tax relief for all pension contributions. Although the rate of tax relief will be higher than 20%, it is, according to the Liberal Democrats, intended to be simpler and fairer.
Long Term Savings
The Conservative’s manifesto pledges to promote long-term savings and pensions products, including the Lifetime ISA (LISA), to encourage and incentivise more people to make provision for their long-term needs.
This policy does not seem to court favour with the SNPs whose manifesto calls for “an end to Tory gimmicks like the Lifetime ISA”, which they say, “can disincentivise other forms of retirement savings that offer a greater return.”
Other Pensioner Benefits
One contentious issue arising from the launch of the manifestos is that of winter fuel payments for pensioners. Currently, most pensioners are entitled to receive the winter fuel payment but the Conservatives plan to means test this benefit so that only the neediest receive it. Both Labour and UKIP are committed to keeping the winter fuel allowance for all pensioners as is the SNP who plan to extend it to families with severely disabled children. The Liberal Democrats say they will withdraw it from pensioners paying the higher rate of income tax at 40%.
Despite these differences, senior citizens can breathe a sigh of relief as all parties appear to be in agreement that the free bus pass for pensioners will remain.
Although pensions have recently been subject to the introduction of the greatest changes in a generation, what is clear is that there is little agreement between the main parties as to what happens to pensions next. It appears that despite whichever party gets into power that further changes are in the pipeline.