After the UK general election, what now for pensions?

Now that the dust has settled after the UK general election, it is clear that the Conservatives will continue to govern as the largest party in Parliament, albeit without a parliamentary majority. With much of the party’s manifesto jettisoned in yesterday’s Queen’s speech, what can we expect to change over the coming months – and will any unanswered questions be addressed?

What plans are now off the cards?

As the Conservatives do not have a parliamentary majority (and currently no deal with the DUP), their plans to scrap the state pension triple lock appear dead in the water for the duration of this parliament. We feel that the triple lock is unsustainable, so it will need to be revisited at some point in the future.

Other planned Tory measures to curb spending are also off the cards. But with continuing pressure to loosen the fiscal purse strings, the Government is likely to need to raise taxes or return to an overhaul of pension tax relief. Under George Osborne’s tenure as Chancellor, the Treasury had conducted a review into the future of pension tax relief, but reform was shelved on the basis it was ‘not the right time’ for a radical upheaval. Instead, we got the introduction of the Lifetime ISA.

A period of uncertainty

The introduction of a flat pension rate – at 30%, for example – would help generate revenue, while ensuring that the only people negatively affected will be the higher earners, who most likely rely a lot less on their state pension than middle and low-income earners. Such a move would increase the attraction of pensions to the majority of the public who are subject to the basic rate of tax.

Whatever happens, it is clear that we are in a period of huge uncertainty, which will probably remain until the Chancellor’s Budget towards the end of the year. So far, the fact that Philip Hammond remains Chancellor is a small token of stability. But in this ever changing environment, who knows if this will be the case by the time of the next Budget. As always, if you have any deep concern over your finances and their future, please contact us.