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Mike Morrison: Election leaves key savings policies in limbo

AJ Bell head of platform technical Mike Morrison

So the general election itself is over but the dust has far from settled. As I write,  Prime Minister Theresa May is yet to strike a deal with the Democratic Unionist Party to support a minority Conservative Government. Where this leaves the savings industry is far from clear.

We can divide some of the key policy issues into short-term quick-wins and longer-term, more difficult considerations. Let’s start with a look at the quick wins.

The decision to call a snap election interrupted a number of key personal finance policies expected in the 2017 Finance Bill.

Those omitted for convenience included proposals to reduce the dividend allowance from £5,000 to £2,000 and cut the money purchase annual allowance from £10,000 to £4,000.

The MPAA reduction is particularly problematic because the Government had specifically confirmed it would apply from 6 April but never actually put it into law.

The worst-case scenario is that the reduction will be applied retrospectively, causing issues for those who have paid in excess of the proposed new limit.

It would seem eminently sensible to delay the cut or, at the very
least, allow anyone facing a tax charge to get a refund of their contributions.

Another abandoned provision which would be a quick and easy win is the consultation to address pension scammers. Let’s get the cold-calling ban finalised as quickly as possible.

Now onto the big issues. These are likely to be consigned to the “too difficult” file for the time being, which is frustrating:

  • Social care funding
  • Radical pension tax relief reform
  • The state pension triple lock (although, with inflation above 2.5 per cent, a double lock would suffice)
  • The ageing society
  • Intergenerational issues.

There is one more issue that perhaps falls between the two: the review of the state pension age. In the Parliament before last, it was agreed this would be reviewed periodically.

The first review was done by former CBI director general John Cridland, along with a second from the Government Actuary.

Both were published before the snap election was called and the following recommendations were made:

  • The Cridland review recommended bringing forward the rise in state pension age to 68 by seven years from 2044 to 2037 (along with a number of other factors such as mid-life “MOTs”)
  • The parallel review from the Government Actuary looked ahead to a possible rise in the state pension age to 69 in 2040-42, then to 70 by 2054-56.

The deadline for issuing a response to these reports was 7 May (in statute). Just as the election was announced, this deadline was pointed out to the Government but no response was forthcoming and the issue became one for the campaign playground.

So the dust is still swirling but there is a lot of work to do.

Mike Morrison is head of platform technical at AJ Bell

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