Yahoo Finance What Labour and the Tories are offering pensioners in their manifestos
The last week has seen a flurry of manifestos outlining what the various parties will do should they win the election. State pension has been a key area, with pledges to support the triple lock coming early in the campaign. The Conservatives then went one step further with their triple lock plus. Under the pledge, the personal allowance for pensioners will rise every year, so that someone reliant on the full new state pension (currently around £11,500 pa) won’t pay tax on it.
It’s a strong response to the issue of frozen tax thresholds pulling more pensioners into tax-paying territory. It will be welcomed by pensioners who have had their budgets squeezed by the cost of living crisis. However, others will question whether a state pension system that is already under pressure can withstand the extra cost.
But what else are the parties offering pensioners? The Conservatives went big in their manifesto with a promise to maintain all current pensioner benefits. These include free bus passes, winter fuel payments and TV licences for those who qualify.
Watch: What Labour’s ‘U-turn on lifetime allowance’ means for your pension
They also unveiled the Pension Tax Guarantee. Under this the Conservatives have promised not to introduce new taxes on pensions so tax free cash and tax relief on contributions remain untouched. This will bring much needed certainty for people looking to make the most of their pension contributions.
The Liberal Democrats also highlighted their support for the triple lock as well as outlining plans to address the gender pension gap and improve state pension helplines so people can get speedier resolution to their queries.
By contrast, the Labour manifesto has been more muted. The promise to maintain the state pension triple lock was in there but there was no mention of their widely reported decision not to reintroduce the lifetime allowance. Similarly, there were no pledges around changes to pension tax relief or allowances.
So, what might that mean? Rumours abound ahead of any fiscal event that the government might be tempted to prune back allowances or the tax relief on pension contributions. They are fertile ground for any government in need of cash. For instance, we’ve seen major changes to the annual allowance in recent years. As recently as 2010-11 it stood at a whopping £255,000 before being slashed to £40,000 and then bouncing back up to £60,000.
Watch: What's next for state pension? Sunak unveils 'Triple Lock Plus'
The rumour mill has also gone into overdrive about the potential for a Labour government to slash pension tax relief. The genesis of these rumours appears to have been comments made by Rachel Reeves several years ago in support of a flat rate of around 33%. Such a move would provide a welcome boost to the contributions of basic rate taxpayers, but a cut for those on higher and additional rate.
However, Labour sources have since said such a move is not a current Labour policy, though there’s nothing preventing Labour, or indeed any other party tinkering with it in the future should they win the election.
Labour has promised to conduct a thorough review of the pension landscape to make sure it works as well as it can and issues such as allowances and tax relief could be a factor in this. The key would be for any review to be conducted in a thorough manner taking an overarching view of the whole system, rather than constant tinkering around the edges.
The system needs to deliver long term certainty to help people plan for their retirement with confidence without worrying about being tripped up by complex legislation. Such a review should happen regardless of who wins next month.
In the meantime, people should work with the system as it currently is making full use of all the pension allowances available to them to build their financial resilience in retirement.
Watch: Sir Keir Starmer and Rachel Reeves questioned about there election plans
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