What now for pensions?

Now that the dust has settled on the UK General Election result, it appears clear that the Tories will continue in government as the largest party in Parliament, albeit without a parliamentary majority. But with much of the Conservative manifesto jettisoned in yesterday’s Queen Speech, what can we expect to change over the coming months? And will any unanswered questions be addressed? Andy James, head of retirement planning at Tilney, looks at how pensions may fare.

Andy James, head of retirement planning:

“Following the election result and the fact that the Conservatives do not have a parliamentary majority (and currently, no deal with the DUP) their plans to scrap the state pension triple lock appear dead in the water for duration of this parliament – though this will need to be done at some stage as it is unsustainable as it is.

“With other planned Tory measures to curb spending now also off the cards, but continuing pressure to loosen the fiscal purse strings, the Government is likely to need to raise taxes or return to an overhaul of pension tax relief. Under George Osborne’s tenure as Chancellor, the Treasury had conducted a review into the future of pension tax relief but reform was shelved on the basis it was ‘not the right time’ for a radical upheaval. Instead we got somewhat of a ‘sticking plaster’ with the introduction of the LISA.

“The introduction of a flat rate pension rate – at 30%, for example – would help generate revenue, while ensuring that the only people negatively affected will be the higher earners, who most likely rely a lot less on their state pension than middle and low income earners. Such a move would increase the attractions of pensions to the majority of the public who are subject to the basic rate of tax.

“Whatever happens, it is clear that we are in a period of huge uncertainty which will probably remain until the Chancellor’s budget towards the end of the year. So far, the fact we have the same Chancellor is a small token of stability. But in this ever changing environment, who knows if this will be the case by the time the Budget occurs. As always, if you have any deep concern over your finances and their future, make sure you consult your financial planner.”