Parties expected to take ‘safety first’ manifesto approach to pensions

The major political parties are expected to adopt pension policies that do not take major risks and avoid radical reform, according to Royal London.

In a new policy paper, Royal London stated it did not expect any of the main parties to include any radical pension tax relief reform as they look to avoid upsetting key voter groups, but there may be two areas of focus.

It predicted that parties may focus on ending an anomaly where lower paid workers miss out on tax relief on their pension contributions and addressing the issues around the tapered annual allowance, which may depend on the finding of a review into its impact by the Treasury.

The report continued: “The Liberal Democrats have proposed a more radical reform agenda for pension tax relief, but it is unclear if controversial proposals to limit tax free lump sums and introduce ‘flat rate’ tax relief will make it from the conference floor to the manifesto.”

Uprating of the state pension for UK nationals living in the EU after Brexit could become an election issue, as the government has only committed to uprating until 2023, while Labour has previously promised that all UK pensions will be uprated anywhere in the world.

Royal London said that it expected Labour and the Scottish Nationalist Party to oppose state pension age increases due to worsening life expectancy improvements, while the Conservatives are expected to restate their intention to hold another five-yearly review.

It also predicted that the number of “tough choices” included the Conservative manifesto, such as the triple lock on the state pension, would be an indicator as to how confident they are.

It cited the 2017 Conservative manifesto, written at a time when the party “expected a comfortable victory”, which included a larger proportion of controversial policies, such as abolishing the triple lock and implementing the means-testing of winter fuel payments.

The firm predicted that Labour and the Scottish Nationalist Party would oppose state pension age increases due to worsening lift expectancy improvements, while the Conservatives are expected to restate their intention to hold another five-yearly review.

Commenting on the report, Royal London director of policy, Steve Webb, said: “With the election outcome highly uncertain, we are likely to see a ‘safety first’ approach to pension policy with few ideas for radical reform.

“The 2017 Conservative manifesto did contain tough measures such as scrapping the triple lock and means-testing winter fuel payments. Whether or not these are repeated in 2019 will be a key indicator of the Conservatives’ electoral confidence.

“Recent data on how long we are all living is likely to lead to stronger opposition to rapid state pension age increases, and the opposition parties are likely to repeat pledges to support women affected by rapid state pension age increases.

“Areas in need of systematic reform such as pension tax relief are unlikely to be debated in any depth during the election campaign and any proposals are likely to be announced when the campaign is over rather than before votes are cast.”

Royal London also said that it expects the role of pension scheme in tackling climate change and environmental issues is likely to be a “much stronger theme” in the 2019 manifestos, especially for Labour.

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