This morning saw the Conservatives win a Commons majority of 80, the party’s largest since 1987. What does this mean for pensions in the UK?
Let’s look at the pensions policies in the Conservative Party manifesto which was published on 25 November 2019.
The Pension Schemes Bill 2019-20 (the “Bill”)
The Conservatives have pledged to reintroduce the Bill which had been suspended to allow for the general election. The Bill covered, among other things:
– Increased powers for The Pensions Regulator.
– A framework for the operation of new pensions dashboards, which will consolidate pensions information and provide access to all important data from all schemes, online, and in one place.
– New publishing requirements on funding strategy for trustees of defined benefit (“DB”) schemes.
– Creation of new and transparent regulation setting out when members can transfer out of DB schemes.
– A new regulatory framework for defined contribution (“DC”) schemes.
Doctors’ pension taper
Under the current system, a taper applies on pension/benefit accrual above a certain level. Once the threshold is exceeded, tax is payable.
It has been said that this discourages doctors from working extra hours in order to avoid being subject to ‘punitive’ tax rates. To incentivise doctors taking on more shifts, the Conservatives have pledged to hold an ‘urgent review’ of the taper in the next 30 days (consulting with the British Medical Association and Academy of Royal Colleges).
Triple lock provides that the minimum rate of basic state pension increases each year by the highest out of either: inflation; average earnings growth; or, 2.5%. The triple lock is set to stay according to the manifesto.
The manifesto also outlined plans to raise the National Insurance threshold which would affect how much people would need to earn to contribute towards their eligibility for a state pension. The lower earnings threshold for automatic enrolment (currently set at £6,136), is also tied to National Insurance meaning that a higher threshold would result in a lower amount of earnings being pensionable.
Net pay/relief at source
The manifesto committed to launching a comprehensive review into the problems faced by some people earning between £10,000 and £12,500 and who pay into a “net pay” pension scheme but do not receive the same level of tax relief on pension contributions as savers in “relief-at-source” schemes.
Other topical issues
The Conservative manifesto is silent on: the plight of state pension age campaigners Women Against State Pension Age Inequality (WASPI), establishment of a pensions commission, and automatic enrolment for the self-employed. The party’s stance in relation to these issues therefore remains to be seen.
If you would like to discuss anything raised in this blog, please get in touch with your usual contact at Brodies.
On December 13, 2019