Dan Jones  

Election puts pensions up for grabs again

Dan Jones

Dan Jones

Any discussion of potential changes to pensions tax relief or the triple lock should begin by acknowledging that we’ve been here many times before. The alarm has been sounded so many times at this point that it’s getting difficult to distinguish it from background noise. I sometimes wonder whether a sighting of the apocalypse-heralding horsemen would be accompanied by a press release asking what it means for pensions taxation.

In fairness, the repeated distress signals have partly arisen from a recognition that all bets are currently off when it comes to the government’s domestic policy plans. The Treasury has repeated said it has no plans to cut reliefs. But these commitments are easily reversed when other priorities become more pressing.

So one unsurprising outcome from the surprise election is that intermediaries now find themselves again being bombarded with speculation that the pensions landscape faces another overhaul.

To add to tax reliefs, and the triple lock, we now have a variety of changes that have been postponed from the current parliament. 

Plans to cut the money purchase advice and dividend allowances, as well as extending the tax-free pensions pot advice allowance, are among those to have been put on hold.

The government has said it will push through these changes “at the earliest possible opportunity” in the next parliament. In the meantime advisers are in limbo. But limbo must feel like the default state of being for intermediaries who are constantly told that major reform is on the horizon.

So while little may be uncertain about the outcome of the election, its arrival will present the opportunity to validate some theories. At the time of writing, the triple lock had become a point of minor national debate, courtesy of Labour’s commitment to keeping it and the government having yet to reveal its hand.

It won’t be long until we find out the Conservatives’ intentions; the manifesto will arrive in early May. In theory, the policy is relatively inexpensive: official forecasts suggest earnings will grow by more than 2.5 per cent, and by more than inflation, over the course of the next parliament. This would mean pensions rise in line with earnings as per usual state pension policy.

The problem, of course, is that wage growth could easily disappoint once again – at which point the triple lock starts costing money, and raising the hackles of other parts of the population.

On top of this are the various signs that the policy was already on the way out: the Cameron-era manifesto pledge to maintain it until 2020 was only belatedly backed by the Theresa May government.

The fact is the prime minister and chancellor will never have a better opportunity to get rid of it. The Conservatives have a lead of more than 20 points in the polls, and that won’t be dented by such a decision – right or wrong. A counter-argument is that there’s no need for the government to do anything but play to its base. Securing the ‘grey’ vote has always been a crucial route to power, but never before will it have delivered the kind of landslide that looks to be approaching.