A pensions revolution has been happening over the past five years with the unveiling of auto-enrolment, George Osborne’s pensions freedoms and major changes to the state pension. These changes and experiments are far from being over and with the calling of the snap General Election this week, the major political parties will need to set out their stall for the direction of these projects for the next four to five years.
Tax and pensions
1. Does your party think pensions tax relief should be overhauled so that Pensions work like ISAs?
2. Does your party think the pensions freedoms are a force for good for people or would you prefer to see more people make decisions resulting in a secure income for later life?
Brooks comments: “The Treasury has toyed with the idea of changing the structure of pensions to get hold of the pensions tax relief that contributions receive which would be a short-term boost to the exchequer. However, it is not a zero sum gain with future withdrawals being tax-free. However, in a time when manifestos are for making spending promises and a tax charge on those deemed well off not being a concern for the many this may well be a vote winning measure with the money used to boost something else.”
Auto-enrolment
3. How would your party improve the reach of auto-enrolment or do you think it’s fine as it is?
“So far so good for auto-enrolment, but the Government has already promised a review in 2017 for auto-enrolment looking at its scope and the level of savings. The parties will need to take a view on what they think this review should focus on, including the low paid, those affected by the gig economy, self-employed and those with multiple jobs. With opt-outs lower than expected it would appear that the general public like the auto-enrolment method and so pledging to extend it could be a vote winner if people feel included.”
State pensions
4. Do you think the triple-lock should remain?
5. Do you think the current state pension is big enough?
Brooks says: “The triple-lock is a major issue for those people already in receipt of their state pension and being the party to pledge to ditch it could be a major gamble. Keeping it may be more straightforward as while inflation rises the promise becomes cheaper and pledging to review in 2020 would seem the pragmatic view. However, pledging to have it forever could be a bold - if expensive - move and I am not sure the parties will be tempted to do this.
“The new state pension is set at a level just above the amount where people would have received means-tested benefits. It is not a generous amount. Pledging to increase this, and the basic state pension, to higher levels or reintroducing means-tested top-ups would be a vote-winning plan.”
Equality
6. What is your position on same-sex marriage death benefits which differ for opposite-sex married couples for benefits before 2005 and contracted out rights?
7. Do you think the WASPI women deserve recompense and if so how much?
“There are some inherent inequalities in the pensions system and one of the more galling is the situation whereby same-sex married couples receive worse death benefits right to opposite sex married couples. The parties should pledge to make marriage the same for all and death benefits the same for all.”
Brooks continued: “The WASPI campaign has consistently made waves in pensions circles and most opposition parties have voiced their support for the WASPI cause. However, to date, all solutions put forward have been rejected by the WASPI campaign. Putting a reasonable and costed solution would certainly be a vote winner for those affected and sympathetic.”
The future
8. Do you think the long-term nature of pensions would be best serviced by a strategic independent retirement commission?
9. How would you encourage people to save more for their retirement?
10. How would you improve the financial education so that we have a generation of people ready to save for their future?
“Calls for an independent retirement commission has been resisted by political parties for years”, states Brooks. “However, with the mounting list of difficult decisions it would seem a get out of jail free card to appoint a commission to make pensions recommendations which Government can enact. Many in the pensions industry would prefer the power to go with it, but we have to be realistic and this would be unlikely.
“As a nation, we continue to not save enough for our retirement nor have the level of knowledge required to make informed decisions. A pledge to invest in financial education for young people - and even some adult learning - would be a great way of helping people to wake up to the importance of sound financial planning, saving regularly and investing intelligently.”
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