The Liberal Democrat’s manifesto is short on pensions promises, but will a tax relief review prove a pensions vote-winner?

The Liberal Democrat’s manifesto is light on pensions promises. Could a focus on intergenerational fairness, such as helping younger generations to get on the housing ladder, plus the removal of the public sector pay cap put individuals in a better position to save for retirement over time?

STATE PENSION

The LibDems have committed to retaining the triple lock, at least until the 2022 election. That will ensure the state pension rises by the higher of 2.5%, average earnings or the Consumer Price Index each year. While praising the short-term benefit of the triple-lock, Tom McPhail, head of policy at Hargreaves Lansdown gave its continuence a more measured response, saying that there is “widespread consensus that it has served its purpose”. He added that rather than five more years of triple lock, “we’d like to see the next government look again at pensioner incomes, the state pension and the most suitable way to protect them against inflation.”

WORKPLACE PENSIONS

The big news in the Liberal Democrat manifesto is its pledge to look into reforming pensions tax relief, with the idea of applying a rate above the 20% basic rate for everyone saving into a pension. Given that this is merely a commitment to establishing a review, it “doesn’t take us any further forward at this stage,” said Malcolm Mclean, senior partner at Barnett Waddingham. He speculated that the next Chancellor, regardless of who wins in the election, might consider a single rate. “The future of higher rate tax relief is something all the political parties are likely to have in their sights.”

However, Chris Noon of Hymans Robertson was less convinced that a single rate is the answer. While conceding that tax relief is currently “an incoherent mess”, he added that a single rate would create complexity in relation to final salary pension plans, which “already have beneficial tax treatment”, and questioned whether it would be “likely to make pension saving less effective for the middle earners who are already the most under-saved.”

The party has pledged to equalise pensions rights for same-sex couples, possibly including survivor benefits. Under current legislation, survivors from same-sex marriages are only legally entitled to death benefits that have accrued since the Civil Partnership Act of 2005.

WHAT’S NOT IN THERE?

The LibDem’s manifesto isn’t bursting at the seams with pensions-related proposals beyond those we’ve listed above. The notable absence, present in both the other parties’ manifestos in some shape or form, is a reaction to the collapse of BHS and ensuing pensions fallout, and how similar scenarios might be avoided in future.