12 May 2010
The Conservatives and Liberal Democrats coalition deal could
have heavy implications for policies on tax relief on pension
scheme contributions.
As part of the coalition deal yesterday, the Conservative and
Liberal Democrats agreed to increase personal tax allowances from
April 2011 to achieve a "long-term goal" of a £10,000
personal tax allowance. However, while the new government has yet
to set out how it plans to pay for this promise, the Liberal
Democrat's manifesto said it would fund this policy, in part, by
giving tax relief on pensions only at the basic rate. The
Conservatives made no manifesto pledges on pensions tax relief.
Despite possible conflict in this area, there are wide areas of
agreement in manifesto pensions policy pledges between the
Conservatives and the Liberal Democrats.
Both parties said they would pay compensation to Equitable Life
policyholders and pledged to scrap the rule which compels most
people to buy an annuity when they reach 75.
Both parties have also spoken in favour of restoring the
earnings link for the state pensions - with the Lib Dems promising
to do this immediately. The Conservatives said before the election
they would pay for such a move by increasing the state pension age
to 66 by 2016 for men and 2020 for women.
In addition to this, both parties also agreed about early access
to pension savings. The Lib Dem manifesto said they would also give
people greater flexibility by allowing them to access part of their
personal pension fund early - to help, for example, in times of
financial hardship, whilst the Conservatives have also pledged to
look at this issue.
The Conservatives said the default age would be reviewed to
allow greater flexibility in working beyond that age and
encouraging it where it is practical to do so whilst the Lib Dems
manifesto pledged to scrap compulsory retirement ages in a bid to
allow those who wish to continue in work to do so.
Other policies promised by both parties include the
Conservatives bringing forward from 2012 auto-enrolment into a
registered pension arrangement on a voluntary basis allowing
employers to plan for implementation and the Lib Dems increasing
the state pension in payment by whichever is the higher of growth
in earnings, growth in prices or 2.5 per cent.
The Lib Dems manifesto also aimed to, over the long term, to
bring in a Citizen's Pension that will be paid to all UK citizens
who are long-term residents, set at the level of the Pension Credit
if resources allowed.
