The recent election result has done very little to help provide clarity regarding pension policy here in the UK. In fact it has muddied the waters even more, when we consider the differences that the Conservatives and the Democratic Unionist Party (DUP) have on several pension related issues.
The Conservative manifesto included the pledge to downgrade the state pension triple lock, in favour of a double lock in 2020, meaning pensions would rise by the higher of earnings and inflation (without the present 2.5% minimum guarantee). This was abandoned when securing a deal with the DUP. The DUP have keenly expressed their support for women affected by the increases to the state pension age (SPA), whereas the Tories have shown no intent to alter their position on this. There is commitment to increase the SPA in-line with increases in life expectancy.
The long-awaited John Cridland report, which reviewed the SPA and the financial sustainability of the system following improvements in life expectancy, recommended that increases in the SPA should be accelerated and rise from 67 to 68 between 2037 and 2039, seven years earlier than intended. The government have recently confirmed that they will be adopting this recommendation.
Under current legislation, during the period December 2018 to October 2020 the SPA for men and women will increase to 66. It will then rise to 67 between 2026 and 2028 and to 68 between 2044 and 2046.
An area of pension policy that the DUP and Tories currently agree on is the continued rolling out of the workplace pension auto enrolment scheme, which is a positive.
There is still a lack of clarity surrounding the Budget announcements which failed to make the Finance Act 2017. It was expected that the Money Purchase Annual Allowance, affecting those who activate flexible access to their pension, was to be reduced to £4,000 in the current tax year. In the 2017 Budget, the government confirmed an intention to lower the limit from £10,000 to £4,000 from 6 April 2017. However, due to the snap election, the legislation needed to implement this is currently on hold. This may appear in the next Finance Bill.
Tax treatment depends on individual circumstances. Tax treatment, rates and allowances are subject to change. The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.