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It seems extraordinary that despite the Conservatives securing their biggest share of the vote since Margaret Thatcher’s landslide in 1983, and nearly 5% more than David Cameron just 2 years ago, it has resulted in a weakened and minority Government.
There is no doubt that the European Union is top of Westminster’s priority list, but what are the wider election implications for the world of pensions?
The Conservatives have negotiated a confidence and supply arrangement with the Democratic Unionist Party and whilst much of their ideology is aligned, the DUP’s views on social issues are somewhat different.
Take the triple lock for example. A key election promise in the Tory manifesto was to dilute this to a double lock by dropping the promise of a guaranteed 2.5% minimum increase on state pensions and restricting increases each year to just inflation or average earnings. The DUP, however, wanted to retain the triple lock and keep the minimum 2.5%pa increase and indeed this was dropped from the Queen’s speech.
When the deal with DUP was announced this week it was revealed the Tories had dropped plans to scrap the triple lock on pensions.
It is also likely that the Government’s Brexit focus will mean there is less of an emphasis on other pension policy areas that are usually subject to Government meddling. Therefore, it is hoped that we may be able to look forward to a period of stability on pension reform.
Conversely the worry could be that the lack of a strong Government means that as we are unlikely to see any big reforms and that we will just see tinkering. Take tax relief, we probably won’t see the big structural upheaval that has been feared over the last couple of years, but the Government is still short of cash so maybe we will see further reductions to the annual allowance and more cuts in the lifetime allowance.
As former Pensions Minister Steve Webb puts it “Governments that can’t do big things have a knack of doing small things and that would be a worry.”
However, as Philip Hammond has ruled out a post-election budget, we will likely have to wait until the November budget until the fun and games, if any, are revealed.
John Dowding Dip PFS
Morgan Lloyd Administration Limited
The annual allowance is the maximum tax-relievable pension contribution that can be paid and is currently set at £40,000pa, although unused amounts can be carried forward from previous years. This has fallen from a high water mark of £245,000 in just 6 years. The lifetime allowance is the total tax relievable that an individual can accumulate – it has also seen a fall from grace down from its peak of £1.8 million in 2011/12 to its current level of £1 million.
This information reflects the regulatory and taxation situation as it affects pensions at the time of publication in April 2017 and is provided to the best of our knowledge. It is not a complete representation of the pensions legislator landscape and is for guidance and information purposes only. We cannot be held responsible for any errors, omissions or subsequent legislative changes.
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