A new policy paper from Royal London predicts ‘safety first’ policies on pensions in the manifestos of the major parties.
The paper, published today, summarises the pensions policies of the parties as set out in their 2017 manifestos and reviews the major changes in the world of state and private pensions since then. It then looks at the major areas of pension policy such as the ‘triple lock’ on the state pension, state pension ages, pension tax relief and automatic enrolment and flags the key areas to look out for when the manifestos are published.
The paper argues that:
- The 2017 Conservative manifesto was written at a time when the Conservatives expected a comfortable victory and included a higher proportion of ‘tough choices’ than would be normal; these included abolishing the ‘triple lock’ on state pension increases and implementing the means-testing of winter fuel payments; the paper argues that it will be a key indicator of the Conservatives’ electoral confidence whether these tough policies are retained or dropped;
- Worsening figures on life expectancy improvements since 2017 make it more likely that Labour and the SNP will strengthen their opposition to state pension age increases; the Conservatives are likely to simply restate their intention to hold another five-yearly review before any further changes are announced;
- Pension Tax relief was not mentioned in either the Labour or Conservative manifestos in 2017 and radical reform of the whole system is unlikely to be a feature of the 2019 manifestos, as parties look to avoid upsetting key voter groups; the two main areas where parties may however focus are:
o Ending an anomaly where 1.7m lower paid workers miss out on tax relief on their pension contributions;
o Tackling the ‘tapered annual allowance’ which seems to have contributed to NHS doctors and consultants cutting their working hours in the face of large and unexpected tax bills; HM Treasury eventually agreed to undertake a review into the impact of the ‘taper’ and the Conservative manifesto could reflect the conclusions of that review;
The Liberal Democrats have proposed a more radical reform agenda for pension tax relief, but it is unclear if controversial proposals to limit tax free lump sums and introduce ‘flat rate’ tax relief will make it from the conference floor to the manifesto.
- Annual uprating of UK pensions for people living in the EU after Brexit could be an Election issue; the government has so far only guaranteed uprating for three years, to 2023; Labour has in the past promised that all UK pensions will be uprated anywhere in the world and is likely to make a firm manifesto commitment to include those living in the EU;
- The 2017 manifestos had little to say about the role of pension funds in tackling climate change and other environmental issues; this is likely to be a much stronger theme in the 2019 manifestos, with the Labour party in particular likely to propose much tougher regulations.
Commenting, Steve Webb, Director of Policy at Royal London said:
‘With the Election outcome highly uncertain, we are likely to see a ‘safety first’ approach to pension policy with few ideas for radical reform. The 2017 Conservative manifesto did contain tough measures such as scrapping the triple lock and means-testing winter fuel payments. Whether or not these are repeated in 2019 will be a key indicator of the Conservatives’ electoral confidence.
‘Recent data on how long we are all living is likely to lead to stronger opposition to rapid state pension age increases, and the opposition parties are likely to repeat pledges to support women affected by rapid state pension age increases. Areas in need of systematic reform such as pension tax relief are unlikely to be debated in any depth during the election campaign and any proposals are likely to be announced when the campaign is over rather than before votes are cast.’
Notes to Editors
Note to editors: Royal London Policy Paper 37 – ‘What to look out for in the party manifestos on pensions’ is available on request.
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About Royal London:
Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.