In part four of our general election special, we explore what the Liberal Democrats see as the big pensions issues

Lib-Dems

The Liberal Democrats have already released their pre-manifesto, which gives us a good idea of what we can expect when the full document is released in March.

The document states that “life expectancy is increasing. This is obviously good news, but it brings challenges; if older people are to enjoy life to the full, they may need a pension income that will last for 20, 30 or even 40 years.

“We want to build on the world-leading reforms we have introduced since 2010.”

What to expect

Coming out of a coalition it can be hard to work out where individual parties stand on specific issues. However, Kevin LeGrand, head of pensions policy at Buck Consultants expects more of the same, “because Steve Webb has been the coalition pensions minister throughout this parliament, he’s effectively introduced Lib Dem policies.”

Steve Webb has been the coalition pensions minister throughout this parliament, he’s effectively introduced Lib Dem policies”

While we can expect the Conservative party to fight this claim, and take credit for much of the reform of the last four years, it is certainly true that the introduction of auto-enrolment has been Steve Webb’s personal triumph. If nothing else we should expect to hear more around getting people saving more for their retirement.

Predictions

1.       The triple lock

Like the Conservatives, the Liberal Democrats are committed to upholding the triple lock.

2.       Pension freedoms

In the pre-manifesto, the party has promised to “press ahead with plans to allow people more freedom in the use of their pension pots”. However, many commentators feel the freedoms contradict the Liberal Democrat philosophy.

Another example of a man who is either not listening during his ministerial briefings, or is arrogant enough to believe he knows better”

Many were surprised, then, when Webb announced further pensions freedoms for those who have already bought an annuity, in a move that Simon Kew, director of pensions at Jackal Advisory, describes as “another example of a man who is either not listening during his ministerial briefings, or is arrogant enough to believe he knows better”.

Given the popularity of pensions freedoms thus far with the electorate, and the fact that Webb has fought so hard to reconcile them with more traditional Liberal Democrat policies, it is hard to see how the party could make u-turn on them. LeGrand thinks that at best we can expect “some tinkering around the edges”.

3.       Auto-enrolment

The Lib Dems have been fairly restrained on auto-enrolment, only committing to completing the roll-out “in full and on time”. However, LeGrand expects the party may pledge to “increase the minimum automatic enrolment contributions from their proposed 8%”.

He also points out that Webb remains keen on ‘defined ambition’ and that if the Liberal Democrats hold any sway in the next government, “Webb is going to keep on pushing that”.

4.       Personal allowance

The party has committed to increasing the personal allowance to at least £12,500 by 2020.

5.       The state pension

The pre-manifesto also commits to introducing a simpler single tier pension.

6.       Pensions taxation

Tax relief is high on the agenda. Webb has been extremely vocal on the concept of single rate tax relief, and the party has confirmed it by announcing that they will “establish a review to consider the case for, and practical implications of, introducing a single rate of tax relief for pensions”, which would be more generous than the current 20%.”

Kevin Wesbroom, senior partner at Aon Hewitt, predicts that we could expect to see “perhaps a uniform 30% tax relief for all (including non-tax payers?”

It’s certainly true that many will see the changes over the last four years as being Lib Dem policies at heart, although the pensions freedoms are largely viewed as coming from the treasury. Indeed Wesbroom comments that “Steve Webb didn’t look all that happy sitting behind George Osborne as he delivered his speech”.

Leaving aside the thorny issue of personal freedom versus voter apathy, important things to keep an eye out for will be more detail around auto-escalation, defined ambition and single rate tax relief.