What the new Conservative government means for your pension

by Rachel Lacey from Moneywise |

Despite pledges to not curtail existing retirement benefits, there is no reassurance to Waspi women.

The Conservative party promised to preserve the triple lock on the state pension in its general election manifesto. This means that the state pension will continue to increase each year by the greater of wage growth, inflation or 2.5%.

It means that in April next year, state pension payments should increase by 3.9% of £343 a year.

Controversial winter fuel payments – which pay all eligible retirees between £100 and £300 once a year, irrespective of income – will also be protected alongside free bus passes and other pensioner benefits.

As part of ongoing reforms to auto-enrolment, the Conservatives will also review the tax treatment of pension contributions of the lowest paid workers, usually women. This will target those earning between £10,000 and £12,500 a year who often miss out on tax relief on their pension contributions.

The result of the election, however will come as a blow to older Waspi women. Jeremy Corbyn had pledged that if Labour won the election it would fully compensate women who have missed out on years’ worth of state pension following increases to the state pension age which they claim were not sufficiently communicated. Compensation for the four million affected women born in the 1950s was estimated to cost £58 billion with individual payments reaching as much as £31,300.

Boris Johnson has not made any pledges to support or help these women in any way.

While Brexit will undoubtedly be at the top of the new government’s to-do list, Tom McPhail, head of policy at Hargreaves Lansdown says, pensions minister Guy Opperman’s ‘oven-ready’ pensions bill should be passed quickly, following time constraints in the last parliament. “This Bill will strengthen protections for occupational scheme members, pave the way for pensions dashboards to be developed and open up the option of a new type of shared-risk pension scheme.”

He adds: “In addition we expect to see pension tax reform back in the table. This is for a couple of reasons. Firstly, the Conservatives have already acknowledged the problems with the Annual Allowance Taper and its impact on higher earners such as doctors; they had also acknowledged the problem of lower earners missing out on tax relief because of the way their employer operates their scheme. They have to fix these problems. Tinkering will only make the pensions system more dysfunctional than it already is; the best answer would be a fundamental reform of the tax treatment of pensions across the board.

“The pressure is on the Chancellor to be positive and ambitious, the spending taps will be turned on and we expect a big Budget in February. The Conservatives have also promised not to raise income tax, National Insurance or VAT so at the margins they will look for fiscal savings; pensions cost tens of billions of pounds and there is the opportunity to save money here. Finally, the new government has the political capital to tackle knotty domestic issues such as pensions and social care which would otherwise have been too difficult to even attempt.

 “We believe there is a way the UK’s pension system could be made simpler, fairer and more efficient, with proper incentives to save for all; there is now the opportunity to pursue this reform.”

Jon Greer, head of retirement policy at Quilter took a similar view and said that it was now time for issues like pension and social care to come back to the fore. “With the political posturing over hopefully these policy areas will get the attention they deserve. And with a Queen’s Speech just a week away we could get clarity sooner rather than later. However, the dreaded B word will likely mean we still have some time to wait for any meaningful change,” he says.

This article was originally published in our sister magazine Moneywise. Click here to subscribe.

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