A new coalition could see the UK facing devolution of pensions powers, repeal of EU legislation or flashy short-termist pensions policies
With the dissolution of parliament just three short months away, the pensions industry is eagerly waiting to hear what each party will have in store in their general election manifestos.
At Pensions Insight, we are expecting pensions to feature heavily. The grey vote remains as electorally critical as ever, so it seems likely parties will try to woo the over-65s, by putting pension policies at the front and centre of election strategies.
Of course, while it is possible to make intelligent predictions as to what issues each party may campaign on, it’s a lot tougher to call what the make-up of parliament will be.
With poll figures showing both main parties coming in at around 30%, significantly below the 40% often used as the benchmark for a workable majority, we may well be faced with another coalition, a minority government, or maybe even another election.
The structure of any future parliament is important because in a coalition or minority government each party will have to compromise on policy ideals. You only need to look at the Liberal Democrats and university fees after the last election, to see the extent to which parties may need to horse trade manifesto promises, in the hopes of getting concessions in other areas.
You only need to look at the Liberal Democrats and university fees to see the extent to which parties may horse trade manifesto promises”
So in a minority government, we need to evaluate what impact the positions of other minor parties may have overall. This can change things quite substantially, particularly if the SNP or UKIP hold the balance of power.
For instance in a Conservative Ukip coalition, Clifford Sims, head of pensions investment at Squire Patton Boggs argues that the most significant consequences facing the industry won’t come from changes to domestic pensions policy, but rather the implications for our relationship with the European Union.
“If the Conservatives, or a coalition of Conservatives and Ukip, support a referendum that leads to an exit from the European Union, that would have a profound impact on UK pensions. There would be some pretty complicated constitutional questions up for debate.
There would be some pretty complicated constitutional questions up for debate”
“Would, for instance, all the discrimination legislation that the UK has embraced (which stems in large part from the EU) be repealed? What would the funding consequences be for DB schemes which no longer had to comply with the scheme specific funding regime that stems from the IORP Directive? Current concerns about the IORP II Directive and its potential future implementation will pale into insignificance beside these bigger questions.“
Equally, a situation where the SNP holds the balance of power may have some interesting implications for the industry. The move towards devolution has already been set in motion, and there seems little chance of stopping it now. Up till now, the Treasury has indicated that it would like to keep taxation and welfare (including pensions) centralised, but the SNP may push for these powers to be devolved out if they form a coalition with, for instance, Labour.
There is a chance that pensions could get lost”
Amidst the negotiations, there is a chance that pensions could get lost. Often leaders want to fight for flashy flagship policies that will have immediate impact, and so are less likely to focus on long-term pensions reform, where the impacts are not immediately felt. The flip side of this is potential populist, short-term, quick implementation pensions policy, which would be seen as a disaster by many in the industry.