The Conservative-LibDem deal, published today, does not mention whether tax relief on pension contributions to higher rate taxpayers wil be reduced to 20 per cent.
But the parties commit to establishing an independent commission to review the long term affordability of public sector pensions, while protecting accrued rights.
The coalition has brought forward the date to restore the earnings link for the basic state pension to April 2011 and has given a “triple guarantee” that pensions will be raised by the higher of earnings, prices or 2.5 per cent, as proposed by the Liberal Democrats.
The parties outline plans to phase out the default retirement age and hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.
The agreement sets out that the Government will, through an independent payment scheme, make “fair and transparent payments” to Equitable Life policy holders for their relative loss “as a consequence of regulatory failure”.
The parties have agreed to hold off on cuts to inheritance tax and to seek a “detailed agreement” on taxing non-business capital gains at rates similar
or close to those applied to income, with generous exemptions for entrepreneurial business activities.
Tackling tax avoidance is “essential” for both parties and detailed development of Liberal Democrat proposals will take place.
The coalition Government insists deficit reduction and continuing to ensure economic recovery is the “most urgent issue” facing Britain. Details should be set out in an emergency budget within 50 days.
Equitable Members’ Action Group spokesman Paul Weir says: “We welcome the new Government’s commitment to implement the Parliamentary Ombudsman’s report in full. After 10 years of denial and obstruction by the previous administration it has been a long time coming.
“Sadly, many thousands of Equitable pensioners have died without justice, sacrificed on the altar of Gordon Brown’s defence of ’lite touch’ regulation.”