View more on these topics

Pensions put in poll position

Party manifestos are being published and we can get a clearer picture of what each party offers as a vision for pensions in the UK.

Cut taxes for pensioners.

Increase the basic state pension.

Abolish compulsory annuities at 75.

Allow younger workers to pt for properly funded private pensions.

Protect the savings and homes for those needing long-term care.

Cut taxes for pensioners

This comes in two parts. People who are not higher-rate taxpayers would not pay income tax on their savings. So most pensioners with savings would benefit.

But “savings” excludes pension income so this would actually increase the relative attraction of saving for retirement through vehicles which do not carry a pension label.

Some people might regard that as a disincentive to pay into a pension. The second part is a pledge to increase the special age tax allowance for pensioners by £2,000 to over £8,000 a year. The manifesto claims this would take one million pensioners out of income tax and save the remaining taxpaying pensioners £8.50 a week.

Increase the basic state pension

In an attempt to reduce the number of people subject to means-testing, the Conservatives propose to consolidate the free TV licence, winter fuel payment and Christmas bonus into a higher basic state pension.

This is very complex because it is optional – pensioners could still choose to take the handouts – the consolidation of the handouts is tax-free but the rest of the basic state pension is not and it would be payable to expatriate pensioners and those in nursing homes.

Over-75s would receive a bigger increase than younger pensioners. This recognises that older pensioners are most likely to be living in poverty and may be the most reluctant to claim means-tested benefits.

Abolish compulsory annuities at 75

This is, perhaps ironically, the approach suggested by former Labour MP Dr Oonagh McDonald. People with personal pensions would not have to buy an annuity by 75 and would be able to empty out the pot as long as they could prove they had sufficient income never to fall back on means-testing.

There are no figures on this in the manifesto. It is interesting that the manifesto refers here only to “personal pensions”.

Does this mean that stakeholder is not eligible or is it just a shorthand for money-purchase pensions?

Allow younger workers to opt for properly funded private pensions

This is the resurrection of the old “basic pension plus” idea, which the Conservatives unveiled a couple of months before the 1997 election.

It is still about contracting out of the basic state pension but this time it would be voluntary, aimed at young people. There is an explicit pledge that the basic state pension would still be available to those who want to take that route, both now and for future new entrants. The manifesto is silent about the terms for contracting out of the basic state pension.

The Liberal Democrats have six bullet points on pensions in their manifesto:

Increase the basic state pension,

Fund this by a new 50p top rate tax,

Establish an Independent Pensions Authority.

Strengthen the position of people with private pensions.

Introduce a new Owned Second Pension Account (long term goal).

Extend the entitlement to the basic state pension to all citizens (long-term goal)

The Liberal Democrats would increase the basic state pension for single pensioners by £5 a week for the under-75s, £10 for those aged 75 to 80 and £15 for the over-80s. Couples would receive £8, £18 and £28 respectively.

In common with the Conservatives, they recognise the oldest pensioners are in greatest need. This would be funded by a 50p tax rate on income over £100,000 a year.

They would establish an Independent Pensions Authority to guarantee that pensioners do not fall behind the rest of the population. It would report annually to the Government on an appropriate uprating for the state pension.

Strengthening the position of people with private pensions would be achieved in two ways. Members of schemes would have a greater say over the use of their pension fund. Also, like the Conservatives, the LibDems would relax the current rules which require people with personal pensions to buy an annuity on or before their 75th birthday. They give no further details on either of these policies.

As a long-term goal, the LibDems would ensure that all people have a second pension of their own to top up the state pension. This looks like a proposal to increase the level of compulsion, especially for the self-employed. The other LibDem long-term goal is to give a universal right to the basic state pension. This would particularly benefit women, carers and long-term disabled.

Plaid Cymru&#39s pension policies are expressed as calls for an adequate earnings-linked retirement pension to everybody without a means test and tighter rules on stakeholder pensions to prevent its use as a means of tax avoidance.

At the time I write this, the other party manifestos are not yet available and I await these with interest.

In the last few years, the current Labour Government has put pensions high on the political agenda.

It is interesting to note that the other political parties also have pensions high on their priority lists. Whatever the outcome of the election, it seems that pensions will continue to be a hot topic in the next few years.


IFAs fear being forced to stop giving loan advice

More than 80 per cent of IFAs fear FSA proposals for lenders to monitor the product information provided to clients will force them to stop offering mortgage advice.The research, by the Intermediary Mortgage Lenders Association, sends a stark warning to the industry and consumers, many of which rely on IFAs for their mortgages. IMLA says […]

Loan rivals unite to buy Mortgage Brain

A consortium of major lenders, including Halifax and Nationwide, has acquired software provider Mortgage Brain in a move which will establish the UK&#39s first “mutual” common trading platform.The two bitter rivals, along with Alliance & Leicester, bought a 51 per cent stake in the company this week which they intend to sell to other lenders […]

An informed client is a happy one

It is often said that investing is about balancing fear and greed. We all want to invest in funds producing stellar returns. But we all know there is no such thing as a sure bet. If you want higher returns, you have to accept higher risk.The propensity to buy funds off past performance has been […]

Private Label introduces convertible mortgage

Private Label has introduced the tracker fix mortgage with a difference.The mortgage has a fixed rate of 5.79 per cent for the first five years of the mortgage for loans of up to 95 per cent of valuation, with a maximum loan amount of £150,000. However during the five-year fixed rate period if the borrower […]

Globe - thumbnail

Considerations for overseas workers in Germany

With Germany’s strong economic growth leading the eurozone’s recovery, many UK businesses are keen to be part of the success story: recent data shows that there are currently more than 280,000* employees working for a UK-controlled company in the country.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm