Pensions: An open goal?

26th May 2017 by Steve Herbert

Theresa May’s stated aim for calling the 2017 General Election is to provide a stronger working majority to enact legislation around Brexit – thus removing the nagging doubts that some of her MPs might rebel in key votes.  And the bottom line remains that, despite some recent own-goals, the Tory Party are likely to be in a much stronger position to govern on 9th June than they are today.

Of course it would be a mistake to think that such additional power will only be harnessed by the Conservatives in the area of EU negotiations.  This same dynamic will also enable other controversial issues to be addressed and resolved to the Government’s advantage.  And, as I have previously outlined in this column, changes to pension tax reliefs could well prove a tempting target for such increased power.

So with the field of play firmly established, let’s take a look at the Conservative Manifesto’s pledge in this area:

“We will continue to support the successful expansion of auto-enrolled pensions, enabling more people to increase their retirement income with help from their employers and government; we will continue to extend auto-enrolment to small employers and make it available to the self-employed. We will promote long-term savings and pensions products, including the Lifetime ISA, to encourage and incentivise more people to make provision for long-term needs, including a house purchase and retirement.”

To my mind this paragraph raises more questions than answers.

A review of the current pension tax relief system is not actually mentioned – but then neither is it ruled out.  And the presence of the Lifetime ISA in the same paragraph as pension savings may well be significant.

For when it was originally announced the Lifetime ISA (LISA) was thought to be an important first step towards a wider change to the tax reliefs inherent in pension savings.  Further strides to achieve this goal have not yet been taken however, owing to the decision to hold – and the outcome of – the EU Referendum last year, coupled with that thin working majority for the Conservatives in the House of Commons.

In just two weeks’ time these dynamics may well have changed.  And with the cost of Brexit – and its real impact on the UK economy – still very much an unknown, I suspect that a Conservative Chancellor of the Exchequer and his/her Treasury team will very soon turn their attention to this important area once again.

Steve Herbert is Head of Benefits Strategy at Jelf Employee Benefits