The pension manifestos: here’s what post-election retirement could look like

The Tories are widely expected to win the snap general election on 8 June, but if we have learned anything from last year, it is that unexpected outcomes can happen on the political stage. Here we look at what all three political party manifestos say about retirement issues such as the triple lock, state pension age and social care.

The population is ageing as a whole, and older people vote more than younger people. According to Ipsos Mori, in the 2015 general election those aged 18-24 were only around half as likely to vote as the over-65s (43 per cent compared with 78 per cent).

Retirement issues will therefore be an important part of many voters’ decision-making process, even though issues around Brexit, taxation and housing take centre stage.

Triple lock

One of the headlines following the publication of the Tory manifesto is the Conservatives’ decision to ditch the triple lock on state pensions. The triple lock means the state pension will increase each year by the highest of three measures: inflation, the average earnings increase, or 2.5 per cent.

They propose to maintain the triple lock until 2020, and when it expires they will introduce a new ‘double lock’, which has previously been suggested by former pensions minister Ros Altmann. A double lock means that pensions will rise in line with earnings or in line with inflation – whichever is highest.

Meanwhile, Labour guarantees to keep the triple lock, while the Lib Dems have stated they would keep the triple lock in place for the time of the next parliament, without commenting on what might happen after that.

Rachel Vahey, product technical manager at Nucleus Financial, says: ‘The Conservatives have chosen to break the manifesto mould of preserving pensioner benefits.

‘They have obviously paid heed to both the Work and Pensions Committee and the John Cridland’s independent review of state pension age which recommended abandoning the triple lock.’

Vahey argues that this could be interpreted as a signal they mean to tackle intergenerational unfairness in an effort to appeal to a wider share of the electorate.

She adds: ‘Retaining the triple lock would have been an easy decision, as the replacement double lock may cost just as much over the next parliament. But in the longer term this change could ease the impact on future governments’ finances.’

State pension age

On the topic of the state pension age, Labour rejects the Conservatives’ proposal to increase the state pension age even further, proposing to freeze it at 66. The Labour manifesto states: ‘We will commission a new review of the pension age, specifically tasked with developing a flexible retirement policy to reflect both the contributions made by people, the wide variations in life expectancy, and the arduous conditions of some work.’

Meanwhile, the Conservative manifesto states: ‘We will also ensure that the state pension age reflects increases in life expectancy, while protecting each generation fairly.’ But although it indicates that further rises will occur, it is not specific about when such rises may happen, or how fast they will be.

The Labour manifesto is also the only one to promise some compensation in response to the Waspi campaign. It states: ‘Over 2.5 million women born in the 1950s have had their state pension age changed without fair notification. These women deserve both recognition for the injustice they have suffered and some kind of compensation for their losses.’

Social care

On the issue of long-term care, Labour proposes to create a National Care Service alongside the NHS.

The manifesto states: ‘There are different ways the necessary monies can be raised. We will seek consensus on a cross-party basis about how it should be funded, with options including wealth taxes, an employer care contribution or a new social care levy.’

Meanwhile, the Lib Dems call for an immediate 1 per cent rise on the basic, higher and additional rates of income tax to raise £6 billion additional revenue, which would be ringfenced to be spent on NHS and social care services.

The Tories plan to introduce a single capital threshold set at £100,000 (including the value of their home), more than four times the current means test threshold for social care. This replaces plans to cap the amount paid by those needing social care at £72,000. Costs will be deferred until death and taken from the individual’s estate.  

‘This will ensure that, no matter how large the cost of care turns out to be, people will always retain at least £100,000 of their savings and assets, including value in the family home,’ says the manifesto.

They also propose to ‘extend the current freedom to defer payments for residential care to those receiving care at home, so no-one will have to sell their home in their lifetime to pay for care.’

Tom Selby, senior analyst at AJ Bell, comments: ‘The reversal of the plans to put a £72,000 cap on social care costs means more people will have to pay more for long-term care.  The proposed £100,000 capital floor below which assets will be protected will include people’s houses and we are a nation of homeowners.  This means large numbers of people are going to have to make their own arrangements to fund long term care or defer payment until their death.’

He argues that the proposals to scrap the pension triple lock and abandon the cap on social care costs both emphasise the importance of private savings. 

‘Less support from the Government means people are going to have to put in place their own plans to fund their retirement and long term care through greater savings in pensions and Isas.’

Winter fuel and bus passes

The Labour manifesto states that the winter fuel allowance and free bus passes will also be guaranteed as universal benefits.

The Lib Dems are planning to stop the winter fuel payments to retired people in the 40 per cent tax bracket ­– 5 per cent of those under 80 and 2 per cent of over-80s, according to former business secretary Vince Cable.

The Tories propose to means-test winter fuel payments, focusing assistance on the least well-off pensioners. They offer to maintain all other pensioner benefits, including free bus passes, eye tests, prescriptions and TV licences, for the duration of this parliament.

Richard Parkin, head of pensions policy at Fidelity International, says: ‘It seems Theresa May is using her strong lead in the opinion polls to kill some of the sacred cows of Tory policy for the elderly.’

The winter fuel payments system has long been criticised as unnecessarily generous to the better off and while means-testing makes sense, Parkin wonders what the administration costs of this might be versus the savings made.

He also adds that the government will need to ensure benefits are ‘pushed’ to recipients, as evidence suggests many of those entitled to receive them will not claim proactively.

Tax relief on pension contributions

Only the Lib Dem manifesto mentions a review to establish whether a single rate of tax relief for pensions should be introduced, ‘which would be designed to be simpler and fairer and would be set more generously than the current 20 per cent basic rate relief.’

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