An election which aimed to strengthen the Conservatives hand has ended with them weaker than before, and likely trying to cobble together a deal with the DUP to govern. How long that arrangement will last is open to debate. But even while it does there are unlikely to be any controversial legislative changes as the Government would need all of their MPs in agreement plus the support of some other party.
From a pensions and long-term savings perspective it leaves huge uncertainty around a number of issues.
The Conservative manifesto proposed replacing the triple lock (which increases State pension by the greater of earnings, inflation and 2.5%) with a double lock (the greater of earnings and inflation). However as no other parties supported change, it’s likely we will see the retention of the triple lock, in the short-term at least.
The independent Cridland review reported earlier in the year suggesting accelerating increases to the State Pension Age (SPA). This would see the increase to 68 taking place between March 2037 and March 2039 rather than between 2044 and 2046 as previously suggested – which would affect men and women born after 5 April 1971.
The Government was legally bound to put forward their views around the state pension age by early May, but ducked this due to the election. As this is an issue on which a decision could be pushed down the track a little while, that may be the simplest option. However, given the legislative requirement the Government may feel duty bound to make some announcement relatively soon. But it is unclear if there is sufficient support to push forward and schedule future increases at this time.
The hope was the thorny issue of the reduction to the Money Purchase Annual Allowance (MPAA) would be resolved shortly after the election. The Government had announced it would be reduced to £4,000 but this was removed from the Finance Bill before the election. The expectation was it would be re-confirmed in the Budget following the election. It is a relatively small change in the overall scheme of things and so may well go ahead. But it’s uncertain whether it will be backdated to April 2017 or effective from next year. The safest course of action until we get that clarity is to assume it will be £4,000 this year with, hopefully, plenty of time to top up to £10,000 should we get the happy news that the reduction has been deferred.
Social care was a controversial issue during the campaign with the Conservatives suggesting a change which would see people stop paying for their own care once their savings and assets fell to £100,, rather than the current £23,000. However a person’s home would be counted amongst their assets. This policy appeared to change as the campaign progressed, and it is unlikely to gain support from many backbenchers so may well bite the dust.
That leaves the habitual speculation about potential changes to pension tax relief. With the exception of the Liberal Democrats it was a noticeable omission from the manifestos. That doesn’t of course mean it won’t happen and it certainly won’t stop the ongoing speculation. A new Government – no matter what its make-up – needs to raise money and a change to pension tax relief may be an easier option to gain widespread support than any change to mainstream taxation.
For now we have the probability of at least one, and possibly two, more Budgets to look forward to over the next six months should the new Government hold together. Otherwise we face the prospect of another General Election, and the uncertainty that brings. Ironically, the desire many in the pensions industry have for a period of fewer changes to legislation and regulation may well happen – as pension policy may be the least of any politician’s concerns.
