After a tense election night and as the Conservative party proposes to form a government, we take a look at some of the manifesto promises made by the two largest parties to see what might be in store for pensions.
Whilst the election campaign has emphasised the clear divide between the policies proposed by the Conservatives and Labour, there has been some common ground regarding the scrutiny of workplace pensions.
Both parties promised action in the area of sales and acquisitions, the difference appearing to be the scope of the action proposed. The Conservatives said that they would amend the takeover regime to require bidders to be clear about their intentions from the outset of the bid process and to ensure that all promises and undertakings made in the course of takeover bids can be legally enforced afterwards. Labour intends to amend the takeover code to ensure that every takeover proposal (including those involving businesses identified as being "systemically important") has a clear plan in place to protect workers and pensioners.
The Conservative manifesto set out several other proposals including:
- giving pension schemes and the Pensions Regulator the right to scrutinise, clear with conditions or (in extreme cases) stop mergers, takeovers or large financial commitments that threaten the solvency of the scheme;
- giving the Pensions Regulator powers to issue punitive fines for those found to have wilfully left a pension scheme under-resourced and, if necessary, powers to disqualify the company directors in question; and
- considering whether to introduce a criminal offence for company directors who deliberately or recklessly put at risk the ability of a pension scheme to meet its obligations.
Moving to "bread and butter" issues, the Labour manifesto focussed on two areas - ending "rip-off hidden fees and charges" and enabling the development of large efficient pensions funds. The Conservatives announced that they would make automatic enrolment available to the self-employed and promote long-term savings and pensions products, including the Lifetime ISA.
The divide between the two parties was more obvious when it came to state pension provision. Whilst the Conservatives promised to maintain the triple lock (the higher of average earnings/CPI/2.5%) for increasing state pensions until 2020 and then introduce a double lock (the higher of earnings and inflation), Labour said that it would guarantee increases by the triple lock throughout the next Parliament.
On the subject of the state pension age (SPA), the Conservatives stated that they would ensure that the SPA reflects increases in life expectancy, while protecting each generation fairly. In contrast, Labour rejected the increase in the SPA to age 67 and promised to commission a new review of the SPA as well as exploring transitional protections for women born in the 1950s who have had their SPA changed "without fair notification".
The Labour manifesto also committed to legislating so that accrued rights to the basic state pension cannot be changed, but future benefits can, and to protect the pensions of UK citizens living overseas in the EU or further afield.
Given the potential common ground in the manifestos regarding the scrutiny of workplace pensions, it appears that the next Government may be willing and able to legislate to make changes in this area. However, changes to the state pension and state pension age may be far more difficult to achieve. It is a case of waiting to see how the political landscape develops and whether the political will exists to make what may be unpopular changes.