The upcoming general election could result in radical reform of pension tax relief, it has been claimed.
On Tuesday (18th April) Prime Minister Theresa May said there would be an election on 8 June in order to strengthen her hand in the upcoming Brexit negotiations.
This was approved yesterday afternoon by the House of Commons.
Malcolm McLean, senior consultant at Barnett Waddingham, said: “A cash-strapped chancellor looking to reduce the nation’s deficit might see this as an opportunity in his Autumn Budget to make savings by introducing a single, uniform rate of tax-relief for all – say at 30 per cent in place of the present 20, 40 and 45 per cent rates– and a reduced annual allowance of £30, 000 or less to further limit the amount of tax-relief being paid out.”
He also predicted that the election may lead to the lifetime allowance being abolished and/or the high earners’ annual allowance taper similarly disbanded.
One of the controversial aspects of recent pension policy has been the costly triple lock on the state pension – which means it goes up by the highest of inflation, earnings or 2.5 per cent.
Mr McLean said that if the Conservatives win a large majority, they may scrap the temporary uprating arrangement of the triple-lock – and replace it with a link to rises in average earnings.
He said: “They will be wary, of course, of losing some of the grey vote bearing in mind that Labour has already committed itself to renewing the lock, should they be elected, until 2025.”
Former pensions minister Sir Steve Webb, now Royal London's director of policy, points out that the government has a legal duty to respond to the Cridland review of the state pension age by 7 May 2017.
He said: “The prospect of an imminent election probably means an aggressive timetable with 20-somethings working into their seventies is off the table for now.”
Mr McLean predicted that the Women Against State Pension Inequality campaign could feature prominently in the election.
He said: “The Waspi campaign will doubtless gather momentum during the campaign with Labour undertaking to offer the worst affected women some form of (largely unspecified) compensation.
“The Conservatives are adamant, however, that some major concessions were made in 2011 to the accelerated programme of state pension age rises and they cannot and will not go further.
“Waspi’s wish to have either all their state pension entitlements backdated to age 60 or some interim payments made from the same age point is clearly too expensive for any government to contemplate and probably the most they can hope for is a reduction of the minimum age pension credit threshold to help the worst affected – a suggestion made previously by Labour but rejected by Waspi at the time.”