The Conservative General Election triumph means the much delayed Pensions Bill is likely to be back in Parliament soon, according to a number of financial services experts.

The Conservative Party launched its manifesto yesterday in the marginal seat of Telford with the 64-page document including a number of pensions pledges.

With political parties due to unveil their election manifestos ahead of the 12 December General Election AJ Bell has launched its own election wish list.

The firm has set out a series of proposals designed it says would “radically simplify” the rules savers are required to navigate.

AJ Bell’s ‘manifesto’ includes:

ISAs

·        ISAs, which have become popular with investors partly because of their simplicity, are under threat from the same creeping complexity that has suffocated pensions

·        We now have at least six different types of ISA, each with different rules and restrictions people need to understand

·        The next Government should return the ISA to its simpler roots by creating One ISA incorporating the main features of the existing framework

·        This would include a 25% bonus on the first £4,000 of savings where the money is used to pay towards a first home, payable on completion



Pensions

·        The next Government, whoever it may be, needs to address mounting complexity which risks putting an entire generation off saving for their future

·        In the short-term the annual allowance taper needs to be scrapped to ease strains on the NHS

·        This should trigger a longer-term, independent review of pension tax rules aimed at simplifying the system and encouraging more people to save for retirement

·        The unfair and poorly understood money purchase annual allowance (MPAA) should also be ditched as part of this review. If necessary, the annual allowance could be lowered to compensate for any lost revenue to the Treasury

·        In addition, policymakers should aim to simplify the overall tax structure by moving to a single annual allowance for defined contribution (DC) pensions and a lifetime allowance for defined benefit (DB) pensions

·        Pension death benefits should be formally excluded from the Inheritance Tax net to remove the situation where pension providers, not the customer have discretion over who receives pension funds when someone dies

Andy Bell, chief executive of AJ Bell, said: “All too often election manifestos focus on short term political point scoring, while the savings gap in the UK continues to widen.

“This is one of the biggest challenges our society faces and the next Government will have a huge opportunity to make life a lot simpler for people trying to do the right thing and save for their future.

“Pension reforms in 2006 were supposed to usher a new era of simplification for pensions, but since then politicians have repeatedly tinkered with the rules to the point even an actuary would struggle to make sense of some of them.

“No sensible person would create a pension system from scratch with three different annual allowances, a lifetime allowance and no fewer than seven lifetime allowance ‘protections’.

“Now automatic enrolment has been fully introduced, focus needs to turn to engaging more people to save for their own futures.

“Creating a more straightforward tax system which people understand is a necessary condition for building greater levels of trust in pensions.

“ISAs have similarly morphed from simple beginnings to become increasingly difficult for investors to understand.

“Incorporating the best features of the current ISA system in One ISA, including the bonus for first home purchase, while removing the unnecessary complexity we know puts people off would make life easier for millions of people.

“Furthermore, new investors could be better encouraged to save for their future in a system they can more easily understand.”

A new policy paper from Royal London predicts ‘safety first’ policies on pensions in the manifestos of the major political parties.

The paper, published yesterday, summarised the pension policies of the parties as set out in their 2017 manifestos and reviewed the major changes in the world of state and private pensions since then. 

It then looked at the major areas of pension policy such as the ‘Triple Lock’ on the state pension, state pension ages, pension tax relief and automatic enrolment and flags the key areas to look out for when the manifestos are published.

The paper argued that:

• The 2017 Conservative manifesto was written at a time when the Conservatives expected a comfortable victory and included a higher proportion of ‘tough choices’ than would be normal;  these included abolishing the ‘triple lock’ on state pension increases and implementing the means-testing of winter fuel payments;  the paper argues that it will be a key indicator of the Conservatives’ electoral confidence whether these tough policies are retained or dropped;

• Worsening figures on life expectancy improvements since 2017 make it more likely that Labour and the SNP will strengthen their opposition to state pension age increases;  the Conservatives are likely to simply restate their intention to hold another five-yearly review before any further changes are announced;



Pension Tax relief was not mentioned in either the Labour or Conservative manifestos in 2017 and Royal London says radical reform of the whole system is unlikely to be a feature of the 2019 manifestos, as parties look to avoid upsetting key voter groups.

It says there are areas where parties may focus, however.

These include tackling the ‘tapered annual allowance’ which the firm says “seems to have contributed to NHS doctors and consultants cutting their working hours in the face of large and unexpected tax bills”. 

Royal London says the Treasury “eventually agreed to undertake a review into the impact of the ‘taper’ and the Conservative manifesto could reflect the conclusions of that review”.

The firm also says the Liberal Democrats have proposed a more radical reform agenda for pension tax relief, but said it was “unclear if controversial proposals to limit tax free lump sums and introduce ‘flat rate’ tax relief will make it from the conference floor to the manifesto”.

Royal London believes annual uprating of UK pensions for people living in the EU after Brexit could be an Election issue and says the Government has so far “only guaranteed uprating for three years, to 2023”. 

Labour has in the past promised that all UK pensions will be uprated anywhere in the world and is likely to make a firm manifesto commitment to include those living in the EU.

The firm says the 2017 manifestos “had little to say about the role of pension funds in tackling climate change and other environmental issues”, which is “likely to be a much stronger theme in the 2019 manifestos, with the Labour party in particular likely to propose much tougher regulations”.

Steve Webb, director of policy at Royal London, said: “With the election outcome highly uncertain, we are likely to see a ‘safety first’ approach to pension policy with few ideas for radical reform.  

“The 2017 Conservative manifesto did contain tough measures such as scrapping the triple lock and means-testing winter fuel payments. 

“Whether or not these are repeated in 2019 will be a key indicator of the Conservatives’ electoral confidence.  

“Recent data on how long we are all living is likely to lead to stronger opposition to rapid state pension age increases, and the opposition parties are likely to repeat pledges to support women affected by rapid state pension age increases. 

“Areas in need of systematic reform such as pension tax relief are unlikely to be debated in any depth during the election campaign and any proposals are likely to be announced when the campaign is over rather than before votes are cast.”

Labour has announced that it will fund a cut in university tuition fees through reducing the tax relief on pension contributions for the highest-earners.