Pensions: what to expect after the election

glass bank with many world...
glass bank with many world...

The past five years has seen sweeping changes to pension policy thanks to the coalition and just because the Tories are ruling solo now it doesn't mean the tinkering is over.

In the past five years we've seen auto-enrolment introduced, a cap on workplace pension charges, a new flat-rate state pension planned, and most recently pension freedom that has changed the landscape of retirement for a generation of pensioners.

So what's left, you might be thinking? Well, there are a couple of tweaks that the Tory manifesto raised that will be likely to be pushed through in the next Budget – bets are off on when that will be or whether there will be an emergency Budget.

The biggest change will be for those saving. Despite the Tories, and in fact all governments, claiming pre-election that we need to tackle the lack of pension saving in the country an incentive for saving is likely to be stripped away.

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All parties said they would assess whether to keep the 45% tax reliefs on pension contributions for additional rate taxpayers. The chances are this will be reduced, taken away completely, or if chancellor George Osborne decided to take his cue from his old coalition buddies, introduce a 30% flat rate of relief for everyone regardless of income tax rate.

It's about time this area of pension saving was reformed. Giving greater reliefs to those who earn more has always seemed like a topsy-turvy way of incentivising saving. But if you are a 45% rate taxpayer who wants to boost their pension pot then throw your spare money at your pension before the rules change.

Pensioner cuts

Those who are reaching retirement aren't safe either. While the Conservatives, along with all other parties, have vowed to triple lock the state pension meaning it will rise in line with the highest of inflation, wages or 2.5%.

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But that doesn't mean that all universal pensioner benefits will remain. The party wants to introduce a 'temperature test' to stop the winter fuel allowance being paid to pensioners who have emigrated to hot countries, such as Spain.

This is a sensible move and it could be argued that it should go further to curb pensioner perks for the wealthiest retirees. Is it fair that younger people struggling with increasing costs of commuting to work are subsidising wealthy pensioners with free bus passes?

While it was always assumed that older people vote Tory and therefore policies were geared towards garnering the silver vote, now the Conservatives have won so many seats we can only hope the intergenerational balance when it comes to pensions and savings will tip in younger peoples' favour.

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