Parliament was dissolved on 3 May in preparation for the general election which will be held on 8 June. There has been much speculation about the impact that this will have on pensions and, in particular, whether the Conservative party will abandon the infamous triple lock on the state pension.
Before being dissolved, Parliament approved two new pieces of legislation relating to pensions:
- The Pension Schemes Act 2017 introduced a new regime for the authorisation of master trusts. A master trust may now only operate if it is authorised by the Pensions Regulator. After it is authorised, a master trust will be subject to an ongoing supervision regime which will require the regular provision of information to the Pensions Regulator.
- The Finance Act 2017 contained provisions relating to overseas pensions. It introduced a new tax charge for certain payments made to qualifying recognised overseas pension schemes (QROPS) and made changes to the UK tax treatment of payments from non-UK registered pension schemes.
One noteworthy omission was the change to the money purchase annual allowance (MPAA) which had been announced in the Budget in March. The MPAA is the amount which can be saved annually into a money purchase pension scheme by someone who has flexibly accessed their pension benefits and currently stands at £10,000. It had been proposed that this would be reduced to £4,000 but the change was dropped from the final version of the Finance Act 2017. It will be interesting to see if this is revisited in the next Parliament.
The Triple Lock
The hot pensions topic in the general election is likely to be whether the Conservative party includes a commitment in its manifesto to keep the “triple lock”. This is the method of determining the annual increase in the UK state pension which was introduced by the coalition government in 2010. It guarantees that the state pension will increase each year in line with whichever is highest from either inflation, earnings or 2.5%.
Both the Work & Pensions Select Committee and an independent review carried out by John Cridland have recently recommended that the triple lock should be withdrawn in the next Parliament. Labour has guaranteed keeping the triple lock until at least 2025 and the Conservatives had previously guaranteed that it would be maintained until 2020. However, there is increasing speculation that the commitment will not feature in this year’s manifesto.
In addition to uncertainty for pensioners over future increases to their state pensions, there are a number of other significant issues which were left unresolved at the dissolution of Parliament:
- The DB Green Paper covered a wide range of issues and has the potential to lead to major changes to the operation of DB pension schemes. However, it is still under consultation and it will not be until after a new government is formed that we have any indication of which (if any) of the proposals will be taken forward.
- A major auto-enrolment review is being carried out by an expert group which will consider the existing coverage of auto-enrolment and evidence around the appropriate contributions which should be made to workplace pensions. This report will not be completed until later in the year and it will therefore be for a new government to consider any changes to the existing auto-enrolment regime.
- Increases to state pension age were recommended in the report issued by John Cridland and the Government was due to respond to those proposals by 7 May. However, this is another area where we will have to wait until a new government is formed before any action is taken.
We will now wait and see if any of these issues (and the triple lock in particular) feature in the parties’ manifestos.
This blog post was written by trainee solicitor, Sarah Holding. For further information, please contact:
Michael Collins, partner, Pensions
T: 0121 234 0236