David Brooks, Technical Director at BROADSTONE, said:
“The political manifestos were quite a mixed bag and, in some cases, surprisingly light on pensions detail.”
“The two main parties had well trailed their intentions to change the way tax relief works for high earners. The Conservatives announced theirs as a way to give an IHT giveaway and create a seemingly complicated method for reducing the annual allowance from someone as their earnings increase over £150,000 and when £210,000 is reached only £10k Annual Allowance remains. Labour’s plan is a resurrection of their plans that were left unimplemented as they lost the 2010 election and creates a cliff edge restriction.
“The general public may find it is hard to garner sympathy for high earners but, as usual, it is the unintended consequences of these plans. Those in public sector DB schemes will be disproportionately hit while simply accruing a pension at work. Any complication of the system in these ways should be consulted on and we would urge either the Conservatives or Labour to consult with the industry to canvass views on the most appropriate methods for changing tax relief. The Liberal Democrats to their credit suggested a review of tax relief with a view to implementing a flat-rate tax relief.”
“The coalition parties both tried to take the credit for the single-tier pension and (along with all the parties) the pledge that the triple-lock would continue. UKIP had the interesting idea that state pensions should be made more flexible with a option to elect for early retirement from age 65 (if State Pension Age is later) which, in the context of freedom and choice, is a wise idea and one that may end up being implemented. The tricky area is ensuring the reduction is cost neutral to the country but also not too harsh to make the option unattractive to the pensioner.
“The Greens are pushing for a similar end but with a larger pension £180 pw for a single person. It is interesting that the debate on the size of the single-tier pension has not been more strongly held. The proposed level for a full contributory history is going to be around £150 pw, which is not a large amount to live on.”
Freedom and choice
“Again the Lib Dems and Tories both took credit for this (we may never know who had the first spark) and this may yet define the coalition, from a pensions perspective and one hopes that as they take credit now, they aren’t dishing out the blame in years to come.
“UKIP pledged more money and a ban on cold callers in relation to pensions. The legal ramifications of this are outside my experience but would agree that such a ban would have the potential to save a great many people from being caught, although such a ban would have to extend to social media, text and post and such restrictions may be impossible to police. The focus should be on education and information.
“Labour did not say so much here but in one sentence may have hinted at more work on charge caps (especially in the “drawdown phase”), stronger regulation for scams, working with the schemes to provide assistance and guidance to members and the work of the newly established Independent Governance Committees. This all hints at more change for pension schemes and trustees to get used to. While one hopes that these changes will not be as seismic as they have been in recent years there is no doubt the pensions post-election will remain high on the agenda for politicians looking to create a pensions system fit for the 21st century.
“The Lib Dems were also the only party to continue to push the “secondary annuity” market and the plan to allow members to sell their annuity. While in the name of fairness this seems reasonable the reality of it does seem to be a can of miss-selling worms where the value for the individual is hard to see and points to an idea that still seems headed for the scrap heap of pension ideas.”
“The Lib Dems have included a technical point to consider, as a next step, and once the Personal Allowance rise is delivered, raising the employee National Insurance threshold to the Income Tax threshold, as resources allow, while protecting low earners’ ability to accrue pension and benefit entitlements. This would help to ensure the A/E qualifying rates remain as are so help keep low earners eligible for A/E. I think this is important to stop A/E missing its target audience.
“The Greens, rather bizarrely, appear not to have not noticed that auto enrolment has been live since 2012 and stubbornly refer to the old Stakeholder Pension schemes introduced like a damp squib at the turn of the century.”