A hung parliament: what does it mean for pensions and savings policy
Tom McPhail, Head of policy:
There is so much uncertainty this morning, for some of the following issues we’ll just have to wait and see how they play through over the next few days.
First the big questions:
- Who forms the next government?
- What happens to Brexit?
- What kind of legislative programme will the government put forward?
- Will there be a new Budget?
Until we get answers to these questions, everything else remains in doubt. We will see changes in the Treasury and quite possibly the DWP too (even if the Conservatives form the next government, Simon Kirby and Jane Ellison have lost their seats).
It is clear that the policy centre of gravity has shifted in favour of the Labour position. This probably means even if we get a minority Conservative government there will be less austerity, more government spending, more of a tax burden imposed on the wealthy.
On pensions and savings policy, the kind of issues we’re looking for answers on are:
What happens to the state pension?
The Triple Lock is undoubtedly here to stay until 2020 and possibly for longer now; the Conservatives were alone in campaigning for its abolition after 2020.
Personal tax policy
The Conservatives have championed raising the personal allowance to £12,500 which will probably still happen; increasing the higher rate threshold may not be so easy to deliver now and the tax burden on the wealthy and higher earners is only likely to increase.
It is unlikely there will be much parliamentary energy for any kind of comprehensive review of pension taxation in the foreseeable future, in spite of the Liberal Democrat call for a review. Expect more salami-slicing of allowances, including the Money Purchase Annual Allowance.
Any review of defined benefit pensions and in particular of the generous quantities of tax relief granted to them is looking less likely today.
Savings policy and a savings commission
The imperative to introduce a coherent savings policy to encourage and reward long term savings and investments still exists, even if it may now be harder for a minority government to deliver. However the argument in favour of a savings commission to produce a consensus policy looks stronger. We hope this will become a priority for the next government.
We expect to see the auto-enrolment review run its course. This election result strengthens the likelihood we will now see some of the more inclusive changes such as bringing lower earners and the self-employed into the system.
Later life Care
One of the critical issues of the election campaign; the Conservatives were right to raise the issue of care provision and funding but arguably it was this as much as anything which lost them the election. Implementing policy change on this huge area of policy would have been challenging for a strong government, now it looks a massive uphill struggle for the next government to bring through any really meaningful change in this policy area.