Pension policies to be looked at through fresh eyes in this year’s election

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Posted on: 15th November 2019

According to a recent policy paper from Royal London, this year’s election manifestos will look significantly different from those in the 2017 election when it comes to pensions.

Pension policies: then and now

The Conservative 2017 manifesto included challenging policies when it came to state pension increases and social care funding. This year, however, Royal London pointed out that the situation was less clear, predicting that party manifestos “will resemble something of a ‘bidding war’, with little sign of the rhetoric around ‘tough choices’ which has characterised previous campaigns”.

Royal London also said that it would be surprising if major parties were to propose major changes in particular areas such as tax relief reform as it could create a significant number of losers.

George Osbourne, previous chancellor for the Conservatives, had debated the idea of changing the way in which pension tax is calculated. However, in the run-up to the Brexit referendum, these ideas were dropped.

Calm waters

Aside from the NHS pension scheme, which revealed that doctors were cutting hours to avoid tax, the issue has since taken a backseat.

In its report, Royal London said: “The main element of the tax relief system where announcements are possible would be changed to tackle the issue around NHS doctors and consultants (and others in a similar position) caused by the ‘tapered’ annual allowance.

“The issue has been raised in parliament by MPs and peers from all parties, and it is the one area of the system where manifesto announcements seem possible.”

“Whilst it is easy to come up with reforms that generate more gainers than losers (such as flat-rate tax relief), reform can still generate large losses for some groups.

“In a ‘safety first’ manifesto, the instinct of the larger parties will be to steer away from these issues. It will, however, be interesting to see if the very radical and somewhat controversial proposals by the Liberal Democrats for changes to pension tax relief will make it from the conference floor to the party manifesto.”

There are areas, however, of cross-party agreement in pension policy that could lead to an overlap between the manifestos. These include automatic enrolment support, the development of the pensions dashboard and new models of ‘collective’ workplace pension provision.

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