Something new…something blue…

Andy Cork

I posted here about the things we knew (and the things we didn’t know) about the pension policies we might expect from an incoming Conservative government.  We still have only an outline of their priorities but a speech launching the Conservative’s “New British Economic Model” last week gave us (to coin a phrase) something old, something new, something borrowed from the party blue.

Firstly, the old.   Mr Osborne reminded us that the Conservatives would seek to end compulsory annuitisation at age 75 although this will be “conditional on having sufficient income in retirement to avoid means-tested benefits”.

For the borrowed, the Tories confirmed that they plan to restore the link between the state pension and average earnings.  This is also Labour policy and the enabling legislation was put onto the statute books by the government a couple of years ago – the Tories have now confirmed on a number of occasions that they plan to enact the necessary regulations to bring this into effect.

More interestingly there was something new – three new announcements.  Firstly, we were told that the Tories want to bring forward the date at which the state pension age starts to rise.  Mr Osborne said that he will seek to make the increase to a pension age of 66 no earlier that 2016 for men and 2020 for women – a significant move forward from the current plans of 2024 and 2026 respectively.

Secondly, Mr Osborne told us that he “will work with employers and industry to support auto-enrolment into pensions for those on middle and lower incomes”.  At first glance this seems uncontroversial but note that he only mentions those on middle and lower incomes – are the Tories moving away from universal auto-enrolment? 

Thirdly, and even more intriguingly, Mr Osborne told us that over the longer term, he will reverse the effects of the 1997 abolition of the dividend tax credit for pension funds.  Nothing more was said and I think we can fairly assume that when he says this is one for the “longer term”, he probably means it.

So a bit of a mix of old, borrowed and new – I’ll update the blog if we hear anything further.

Andrew Cork is an associate at Allen & Overy LLP.

Comments published on Pensions Talk do not necessarily reflect the views of Allen & Overy or its clients.

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