Pension experts have hammered Labour's pension plans included in its much trailed general election manifesto, branding the party's bid to get back into power "too costly and complex."
The manifesto confirmed that Labour will guarantee the state pension ‘triple lock’ throughout the next Parliament.
It will increase by at least 2.5 per cent a year or be increased to keep pace with inflation or earnings, whichever is higher.
Malcolm McLean, senior consultant at Barnett Waddingham, said: "There are serious question marks about the cost and long term sustainability of the triple lock in particular with both the final Cridland Report and the Work and Pensions select committee having recently recommended its abolition.
"However over the shorter term horizon of the next five years any extra cost relating to the 2.5 per cent guaranteed underpin may be minimal (for example, today’s (16 May) new CPI inflation figure increase is 2.7 per cent)."
Labour also outlined it will not implement planned increases in the state pension age beyond the age of 66 and promised yet a further review of the state pension age with a focus on flexible retirement.
The pension age is currently set to increase to 66 by the end of 2020 and then to 67 by 2028 and 68 by 2046.
The Cridland review pointed to the state pension increasing to 69 or 70, with a move to 68 by 2039, seven years earlier than currently planned.
The government has postponed its response to this review, after the election.
Steve Webb, Royal London's director of policy and former pensions minister, said: “A £300bn price tag for this policy would leave future generations paying the bill for decades to come."
Linking state pension age to occupation or life expectancy could become a ‘minefield’, difficult to monitor and costly to implement.Steven CameronOn the flexible pension policy, Steven Cameron, pensions director at Aegon, said: “The higher the state pension age becomes, the greater the need to offer flexibility to individuals who through job pressures, health issues or lack of employment opportunity simply can’t keep working into their late 60s.
"But linking state pension age to occupation or life expectancy could become a ‘minefield’, difficult to monitor and costly to implement."
The Winter Fuel Allowance and free bus passes will also be guaranteed if the Labour party is elected to government in June, as will universal benefits, the manifesto added.
Pensions of UK citizens living overseas in the European Union or further afield would be protected.
Previous estimates have suggested somewhere in the region of half a million people are affected by the current policy who would stand to benefit from this manifesto pledge.
Alongside Labour's commitment to extend pension credit to hundreds of thousands of women born in the 1950s who had their state pension age changed without adequate notice, Labour is exploring options for further transitional protections, to ensure that all these women have security and dignity in older age.
On private pensions, the manifesto is silent on pension tax relief rates and how they might be better applied.
However, in a rather vague annoucement, the manifesto stated that "Labour will end rip-off hidden fees and charges."
When pressed for more details on whether this applied to defined benefit or defined contribution pensions, Labour's Alex Cunningham MP, shadow pensions minister, said: "Our aim is to make the pensions industry as a whole totally transparent. "
Barnett Waddingham's Mr McLean said: "It is not clear exactly what Labour intends to do in relation to 'rip-off fees and charges' beyond what has already been done to tackle these in legacy schemes and in relation to auto-enrolment."
There are also proposals to enable the development of large efficient pensions funds, which will mean more cash for scheme members and lower costs for employers.
In the Department for Work & Pensions green paper, published in February, the Conservative government proposed creating a defined benefit "superfund" to provide small DB schemes with scale.
However, it has said such a superfund should probably be a voluntary initiative, and should not be run directly by the government.
Another key manifesto measure is the proposed financial transactions tax, which Labour estimates would raise over £5bn a year.
A financial transaction tax is a levy placed on a specific type of monetary transaction for a particular purpose.
According to critics this move could actually have the indirect consequence of reducing tax raised and could have a big impact on pensioners and savers.
Piers Hiller, chief investment officer at Royal London Asset Management, said: "At a time of uncertainty about which markets (particularly international) investors will choose to utilise post Brexit, adding a further levy would significantly reduce the global competitive position of London. Transactional volumes will move to markets without a levy.
"Jobs will follow those volumes and as a consequence the overall tax take is likely to be lower due to reduced income tax and corporation tax paid. Those that would be hit the hardest are pensioners and those saving for a pension, who will see the value of their savings impacted by the levy.
"This is not a tax on the City, it's a tax on savers and pensioners."
stephanie.hawthorne@ft.com
