Broadstone comments on the pension implications of the Queen’s Speech

27/05/2015

BROADSTONE

When The Queen stated today that “measures will also be brought forward to secure the real value of the basic state pension, so that more people live in dignity and security in retirement”, some commentators viewed this as protecting the triple lock - which pledges to increase the state pension by inflation, wages or 2.5%, depending on which is higher - until 2020.

However, David Brooks, Technical Director at Broadstone, disagrees, saying:

“I believe this comment was aimed at the basic state pension but it is up for debate how - or if - it will have any impact on the single-tier pension at all. It is disappointing that the single-tier pension is becoming mired in confusion when it will be in payment in 11 months’ time. The level of payment is still not known and the lack of clarity around the calculation method means people are still unaware of what they will get. This represents a clear conflict with the original intention.”

Brooks outlined other points of relevance to pensions in the Speech, which included:

  • EU referendum – “The potential for Brexit would have implications for all sorts of pension issues, such as guaranteed minimum pensions (GMP) equalisation. The government thinks that it needs to be equalised because of equality rules; however, not being an EU member, this issue would go away and schemes could convert and deal with GMP in confidence. Solvency II would also not be an issue, as would Test-Achats, and this could result in a boost for more individual pricing of annuities. Also VAT on pension costs could be ignored. The EU referendum has big issues but I would not be surprised if some pension managers and Trustees are tempted to vote to leave the EU in the hope that some of the EU influence on pensions goes away.”
  • Human Rights Act – “The revision may have been put back, but this would also have potential implications for the implementation of discrimination rules in pension schemes and could lead to more legislation and revision of existing regulation.”
  • Tax and NI – “The tax and NI comments made in today’s Speech hint their proposed merger has been put on the back-burner. This is good news for pensioners, who could have been subject to an increase in tax if they were merged, and the benefits of salary sacrifice are retained, so this would also be viewed positively.”