A hung parliament is really not what the pensions industry was hoping for when it woke up this morning.
Such a lack of clarity and certainty can never be great news for savers as it obviously weakens the Government’s hand on savings and pensions policy.
A strong mandate from the people would have provided an opportunity for bold, long-term thinking on savings policy but we are unlikely to see that now.
Constant meddling by successive Governments has created a pensions system littered with confusing allowances and complex rules which often prevent people from saving and a weak Conservative Government is unlikely to change this.
This I think strengthens the need to set up an independent commission tasked with reviewing and simplifying the UK’s pension tax framework and making it easier for people to save.
This could form the basis of a new cross-party consensus and put an end to the incessant political tinkering which puts so many people off engaging with pensions.
Let’s go back to some of the manifesto promises on pensions.
The Conservatives pledged to extend automatic enrolment to self-employed workers who are currently not covered by the reforms. This could be a significant savings boost for millions of people and therefore beneficial.
The Conservatives artfully danced around the issue of increasing the state pension age during the election campaign so as not to alienate older voters.
However, two independent reports called for faster increases in the state pension age, with younger savers potentially having to wait until age 70 to receive the state pension.
The “independence” of the reviews should leave this on the agenda and as life expectancies continue to increase, future generations need to prepare to save more, work longer and potentially retire later.
They also pledged to abolish the state pension triple-lock by 2020, replacing it with a double-lock of earnings or prices, whichever is highest.
These Reforms were strongly opposed by Labour and the Lib Dems but while such changes will inevitably be controversial, the ageing population means they are necessary to ensure the system remains sustainable. Being cynical they are policies which “blossom” a long time in the future which makes them politically difficult.
Let’s be positive for a minute. Prior to the election we had a Finance Bill which never quite got finished.
Now, hopefully it can be pushed through as “unfinished business” and we can tidy up the outstanding issues around the proposals to reduce the Dividend Allowance from £5,000 to £2,000 and the cut to the Money Purchase Annual Allowance from £10,000 to £4,000. We could do with some clarity on whether this will be applied retrospectively.
One policy that must be non controversial is the clampdown on pension scammers that was deferred due to the election. It would be good to at least get this one out of the way and implement it as soon as possible to protect savers from fraudsters.
