Labour v Tory: Clear water on pensions policy

Two days from polling, however, Jeremy Corbyn (previously considered unelectable by his own party) had clawed Labour back within 6 points. In these times when unexpected election results are the new normal, it’s worth looking at how different results might impact pension savers.

State Benefits

Unlike the election two years ago, there is clear water between Labour and Tory policy. The Conservatives are alone in replacing the state pension triple lock with a double lock (from 2020), saving the Treasury £15bn a year by 2060.

Labour will freeze state pension age at 66, costing an extra £300bn compared with the rises currently planned. Meanwhile, left of centre parties are vying for the WASPI vote by promising compensation or delays to pension age increases.

Even UKIP weighed in, suggesting allowing women (but not men) to draw a reduced state pension early.

Private Pension Provision

Here, there is universal agreement on one issue: defined benefit schemes. Following benefit cuts to BHS and Tata Steel schemes, all parties want curbs on M&A activity and excessive dividend pay-outs where these endanger underfunded final salary schemes.

Elsewhere, much is unsaid in the party manifestos. Only the Liberal Democrats talk about a single rate of pension tax relief – an idea touted by the previous pensions minister.

Any other result is likely to lead to radical measures on wealth redistribution.

The Conservatives are silent on personal tax rates, leaving the door open for increases, while Labour will hike rates and reduce thresholds for higher earners.

Of course, this will impact tax relief: under Tory plans, the 40 per cent tax band would narrow, reducing the overall cost of tax relief; with Labour, higher rates of relief would apply to many more taxpayers, so expect the annual allowance taper to be applied at a much lower threshold to limit the cost to the Exchequer.

Other impacts on savers and pensioners

Brexit could look very different depending on the result. Both main parties want to leave the single market, but a close result or coalition could mean SNP and the LibDems can exert pressure to force a second referendum on the deal.

With Mr Corbyn in charge, his stance on rights for EU citizens in the UK could set a more conciliatory tone for negotiations.

Other plans include: from Labour, stamp duty reserve tax on derivatives, which would cut returns on some mutual funds and hedging instruments used by pension schemes, and Land Value Tax, which may disproportionately impact asset-rich, cash-poor pensioners.

From everyone on the left, there is reversal of CGT rate cuts and IHT property allowance; and with the Conservatives, some care costs would be means-tested against housing wealth.

Radical or incremental change?

A Conservative majority government still looks the most probable outcome, with incremental changes to the status quo. Any other result is likely to lead to radical measures on wealth redistribution.

One thing is for sure: the elephant in the room - funding later life care – looks set to be properly addressed at last.

Jon Dean is senior consultant at Altus Consulting