State pensions become ‘key battleground’ in election
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The Conservatives have published their 2019 election manifesto. What has the party that’s been in government for nine years promised on pensions and social care if it gets elected?
As in every election the silver vote is precious, and so the party which helped to introduce the triple lock on state pensions – making them increase in line with the highest of inflation, earnings and 2.5% – is saying it will keep this in place, alongside free bus passes and winter fuel payment.
But the Tory manifesto appears to have been noted more for what it omits than what it contains.
Director of thinktank the Institute for Fiscal Studies, Paul Johnson, said: "If the Labour and Liberal Democrat manifestos were notable for the scale of their ambitions the Conservative one is not. If a single Budget had contained all these tax and spending proposals we would have been calling it modest. As a blueprint for five years in government the lack of significant policy action is remarkable.”
He added that one notable omission was any plan for social care, where Labour made big promises. “In his first speech as prime minister Boris Johnson promised to 'fix the crisis in social care once and for all'. After two decades of dither by both parties in government it seems we are no further forward,” said Johnson.
No commitment to extend auto-enrolment
There are also considerable differences between the two major parties on the future of auto-enrolment. The Pensions and Lifetime Savings Association singles out the Conservatives’ lack of policies to develop pensions auto-enrolment further.
“We are disappointed the manifesto does not include any commitments to extend the scope of pension automatic enrolment to include younger workers, or lower paid workers with multiple jobs, and the self-employed,” said Nigel Peaple, director of policy and research.
He also criticised the party's manifesto for failing to commit to higher minimum contribution levels, currently at 5% for employees and 3% for employers (of qualifying earnings). The PLSA has recommended lifting this to a total of 12% by 2030, and wants to see a fairer split between employer and employee contributions to improve adequacy.
But the association strongly supports the Conservatives’ promised review into the net pay anomaly – could it be that it was saving this ‘easy win’ for an election?
Low-paid workers currently miss out on government contributions if they are in so-called net pay schemes rather than salary sacrifice.
Peaple said the discrepancy between net pay and salary sacrifice means pension contributions for savers who earn between £10,000 and £12,500 are more expensive for those on net pay arrangements, as pensions are deducted before tax, meaning those who do not pay tax miss out on a tax relief boost. “It is our view that this can be fixed by adjusting the data gathering system used by HMRC,” he said.
Tories would reintroduce pension schemes bill
The PLSA has also welcomed the Tories’ pledge to reintroduce the pension schemes bill, which was published just before the election was announced.
Among others, the bill provides the legal basis for pensions dashboards, but there is disagreement in the industry and between political parties over whether there should be multiple commercial dashboards alongside a state-backed one, or just a single state-sponsored dashboard. Labour has thrown its weight behind the latter vision, while the Conservative government has so far insisted that the aim is to have more than one dashboard.
Peaple said that “the initial dashboard must be non-commercial and no others should be introduced until a rigorous consumer protection regime is in place”.
On the dashboard project, Tom Selby, senior analyst at investment platform AJ Bell, noted that the political parties will “need to set their differences aside and focus on delivering something which maximises utility and allows as many people as possible to review their pensions online”.
Manifesto is silent on state pension age rises
The big differentiator between the two major parties appears to be the state pension. While Labour has made promises to keep state pension age at 66, and review it for those in manual jobs, unfreeze overseas state pensions and compensate 1950s-born women for SPA increases to the tune of £58bn, the Conservatives have not made any promises around these.
“Perhaps the big question on pensions was whether the Conservatives would follow Labour down the state pension rabbit hole and make a big state pension offer,” observed Selby.
He said the fact the state pension age isn’t mentioned at all in the Conservative manifesto is a sign that the Tories have no intention of changing the existing timetable of increases, to 67 by 2028 and, it is expected, 68 by 2039.
“This sets up the state pension as arguably the key battleground of this election campaign besides Brexit.”
What stood out for you in the different parties’ manifestos?