Steven Cameron, Pensions Director at Aegon looks at the implications for pensioners from the Conservative Manifesto “The Conservative Manifesto can’t be accused of bribing the grey vote at the expense of the working age population. Pensioners face tough measures as we face the growing costs of an ageing population and intergenerational trends which have seen pensioners incomes rise to just 7% lower than those of the working population* on some measures. It’s a wake-up call that we need a new generational deal to address costs of our ageing society.
“The dropping of the state pension triple lock from 2020 will apply equally across all pensioners, but dropping the 2.5% will only lead to less generous increases in the unlikely event that both earnings and price inflation fall below this in future years. But a continued link to national average earnings does mean pensioners benefit where a stronger economy leads to greater earnings for the working population.
“The move to means test the winter fuel payment will mean some will lose up to £300 a year. The threshold, and whether based on income or assets, will be of interest.
“A new approach to social care funding is long overdue and the Conservative proposals will be contentious. Compared to the current system, pensioners needing residential care will benefit from being allowed to keep £100k rather than the current £23,250. This will be particularly welcomed by those with relatively modest assets in later life. But previous proposals to cap total ‘eligible care’ contributions at £72,000 would have offered far greater protection to those whose assets are well above £100k. This group could still face paying care bills of hundreds of thousands if they need care for lengthy periods.
“With this further reminder that the state can’t provide for all retirement and social care costs, it’s vital that any future Government continues to incentivise private and workplace pension savings.“
David Newman, Head of Pensions at Close Brothers Asset Management comments: “Since the introduction of the triple lock seven years ago, the UK’s population of retirees has grown, both in size and in affluence, a trend that looks set to continue. Combined with increasing life expectancy, older people have become a significant financial burden for the government, leading to the creation of a wealth gulf between retirees and younger generations.
“If the triple lock is scrapped then there will be an even greater need to promote an autonomous savings culture, meaning people save earlier in their lives, taking on enough risk to enable them to meet their retirement goals on their own. It is crucial that those starting their savings journey understand what the right level of risk is for them early on, so that markets can do much of the heavy lifting over the next 40 years and deliver them the pension they need for the lifestyle they want to have in retirement.”
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