Conservative manifesto pledges; commits to ‘urgent review’ of tapered allowance

The Conservative manifesto has outlined plans to address the tapered allowance, pledging to hold an ‘urgent review’, in collaboration with the British Medical Association and Academy of Medical Royal Colleges, within the first 30 days should they be elected.

This follows confirmation of emergency plans by NHS England last week.

Commenting on the interim plans, AJ Bell senior analyst, Tom Selby, stated: “This feels like a sticking plaster to cover an arterial wound, and a much simpler solution would be to just scrap the taper altogether”.

The party is also the first to have confirmed plans in its manifesto to undertake a comprehensive review of the issues caused by a loophole affecting those who use net pay arrangements.

Commenting, Pensions and Lifetime Savings Association (PLSA) director of policy and research, Nigel Peaple, stated: “The [PLSA] strongly supports the Conservative Party’s manifesto commitment to conduct a review into the discrepancies between net pay arrangements and tax relief at source for pensions.

“The discrepancy means automatic enrolment contributions for savers who earn between £10,000 and £12,500 are more expensive for those on net pay arrangements. It is our view that this can be fixed by adjusting the data gathering system used by HMRC.”

The anomaly has been a long-standing issue in the industry, with Selby adding: “It is particularly cruel this anomaly in the system hurts the lowest paid who need the tax relief boost the most.”

The manifesto has now officially confirmed plans around the national insurance (NI) threshold, following party leader Boris Johnson’s announcement last week that the party planned to raise the personal allowance to £9,500.

AJ Bell’s personal finance analyst, Laura Suter, explained that “this initial move will save between £85 and £100, depending on whose estimates you believe. A future aspiration to look at moving the threshold to £12,500 would save around £500 a year, at current prices.”

Suter added: “By shifting NI rates rather than income tax thresholds Mr Johnson extends the giveaway to the lowest earners, in particular those earning less than the current £12,500 personal allowance.”

While the plans may save taxpayers money initially, Aegon’s pensions director, Steven Cameron highlighted the potential effect on state pension entitlements.

Cameron explained: “Under current rules, those not paying any NI lose out on credits towards their state pension. Individuals need 35 years of qualifying NI contributions to receive the full state pension with those with fewer qualifying years seeing a reduction and receive none if they have fewer than 10 years of credits.

Highlighting the ‘triple lock’ as a Conservative introduced policy, the party has now pledged to maintain the triple lock, in line with both the Labour and Liberal Democrat manifestos published last week.

The winter fuel payment, older person’s bus pass and “other pensioner benefits” are also expected to be maintained, while the party has clarified that it “recognise[s] the value of free TV licences for over-75s and believe they should be funded by the BBC”.

Referring to the pensions bill, the party manifesto has outlined plans to reintroduce the legislation that “protects pension pots from being plundered by reckless bosses, helps savers be better informed with pension dashboards, and creates a new style of pension scheme which is more sustainable for workers and employers”.

While many of the key pension policies outlined in the Conservative manifesto are in line with Labour, the key difference, noticeable by its absence, is the lack of policy regarding the 1950s women affected by state pension age changes.

Cameron emphasised that this is “a massive £58bn difference”, referring to the costs associated with the Labour policy of providing all those affected with compensation.

Selby stated: “Boris Johnson hasn’t blinked on the state pension age. … The fact the state pension age isn’t mentioned at all in the Conservative manifesto document suggests the Tories have no intention of altering the existing timetable of increases after Labour pledged to freeze the state pension age at 66.

“This sets up the state pension as arguably the key battleground of this election campaign besides Brexit.”

Another discrepancy between the two key party manifestos, is the lack of policy around automatic enrolment, which has led many in the industry to express concerns around adequacy.

Peaple highlighted: “Less than 50 per cent of all savers are on track to achieve an adequate income in retirement as defined by the pensions commission, and for those who only have DC pensions, only 3 per cent of savers are likely to achieve this outcome.”

In regard to pensions investments, the party has announced plans to “unlock long-term capital in pension funds to invest in and commercialise our scientific discoveries, creating a vibrant science-based economy post-Brexit.”

Peaple added: “The PLSA supports broadening access to different asset classes but cautions that schemes must retain the freedom to invest in suitable assets in line with members’ best interests and not be forced to take on inappropriate levels of investment risk.”

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