Pensions Post-Election
So, David Cameron is Prime Minister and the Conservatives have
entered a coalition with the Liberal Democrats to form a Government.
What does this mean for pensions policy?
Summary
- Iain Duncan Smith is the new Secretary of State for Work and Pensions.
- The Conservatives and Liberal Democrats have reached policy agreement on a number of issues.1
- But the fate of the proposed restrictions on pensions tax relief is yet to be decided.
Who’s Who?
Iain Duncan Smith is the new Secretary of State for Work and Pensions with
Liberal Democrat MP Steve Webb appointed as Pensions Minister.
Pensions Policy
Pensions tax relief for high earners – As yet no concrete details have been released but a policy battle potentially looms. The Conservativeshave previously opposed the planned restrictions on higher rate tax relief for pension contributions (proposed by the outgoing Labour Government), whilst the Liberal Democrats have said they will scrap higher rate tax relief altogether. Could Conservative agreement to the abolition of tax relief for high earners be an easy win in the anticipated policy horse trading in the next days and weeks?
State pensions – The basic state pension’s link to earnings will be restored from April 2011, “with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%”. In addition, the parties have agreed to “phase out” the default retirement age and the planned rise in the state pension age will be reviewed. The increase in state pension age from 65 to 66 will not be earlier than 2016 for men and 2020 for women (currently slated for 2026).
Public sector pensions – Change is on the agenda. There is a commitment to establish an independent commission to review the “long term affordability” of public sector pensions, whilst protecting accrued rights.
Private pensions – The current requirement to buy an annuity at 75 will be abolished.
2012 workplace reforms – There is no hard evidence in the policy agreement but this is one of the areas on which there is, in theory, a cross-party consensus. Therefore, we do not expect the reforms to be withdrawn or significantly amended.
Equitable Life – Policy holders will receive “fair and transparent payments” as recommended by the Parliamentary Ombudsman.
We will be following developments closely.
1 Conservative Liberal Democrat coalition agreement published on 12 May 2010
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