The Conservatives and Liberal Democrats have now published their coalition agreement. The Conservative Iain Duncan-Smith has been appointed Secretary of State for Work and Pensions and Steve Webb of the Liberal Democrats has been appointed Pensions Minister.
The coalition agreement sets out several clear aims for the new government, reflecting the areas of common ground expressed in the two parties’ election manifestos:
- Phasing out the default retirement age and conducting a review into increasing the state pension age to 66 (this will not be sooner than 2016 for men and 2020 for women);
- Ending compulsory annuitisation at age 75; and
- Paying fair and transparent compensation to Equitable Life policyholders through an independent payment scheme.
The coalition is also committed to reducing the cost of public sector pensions through the establishment of an independent commission to review their affordability. There are also plans to restore the earnings link for the state pension with a “triple guarantee” that pensions will be raised by the higher of earnings, the retail price index or 2.5 per cent.
The Liberal Democrats made an election pledge to restrict income tax relief on pension contributions to the basic rate of 20 per cent for everyone. This may lead to higher rate tax payers opting for alternative investments.
A statement made by David Laws, the new Chief Secretary to the Treasury, confirms that the Government is to re-examine any spending commitments announced since the beginning of 2010. This suggests that one of the areas which will come under scrutiny is the award of the administration contract for the National Employment Savings Trust (NEST). Ongoing discussions in relation to the NEST contract are understood to be taking place between Iain Duncan Smith and Steve Webb.
The new Chancellor of the Exchequer, George Osborne, has announced that there will be an emergency budget on 22 June 2010. It is expected that the formation of an Office for Budget Responsibility will be announced, together with cuts of £6 billion from the public spending budget.