What has the UK Independence Party promised on pensions and what does it really mean? Sara Benwell explores
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When we last evaluated Ukip’s pensions policy in January this year, they didn’t have one. Somewhat surprising, given 41% of people intending to vote for the party were over-55 at the time, according to an Ipsos Mori Political Monitor.
Since then a lot has changed and Ukip now have a fully fledged pensions policy.
Launching the manifesto, Farage said, ”Pensions have changed considerably since 2010. The state pension has been simplified to a single-tier. The need to apply for pension credit (which often went unclaimed) has been removed. The ‘triple lock’ now guarantees the state pension will increase each year by the higher of inflation, earnings or 2.5 per cent. There is greater flexibility in how personal pensions can be accessed. These are all welcome reforms.”
But what is Ukip’s pensions policy? At Pensions Insight we’ve looked through the 76 page document to summarise the most relevant bits for pensions.
Flexible state pension age
”Raising the retirement age to 66 by 2020 and to 67 by 2028 is hugely unpopular. It has been especially tough for women, who until 2010 could retire at 60. Also, millions of people who can now withdraw unlimited amounts from their personal pension pot may not be well-informed enough to make the best onward investments, or avoid falling victim to scams.”
“When you have looked forward to retirement, short notice changes to the state pension age can wreck long-term plans. UKIP will give pensioners some choice over the age at which they choose to retire.
”We will introduce a flexible state pension window, which will widen over time, so even when the state pension age increases to 69, pensioners will still be able to take a slightly lower weekly state pension from the age of 65.
“Pensioners will know how much less they will be paid at the time they make their decision. At the moment, you can delay taking your state pension in return for a slightly higher amount, so UKIP’s proposal merely extends the option in the other direction. This proposal will be cost-neutral to the state over time. A flexible state pension window already works well in other countries, notably Italy, Norway, Sweden and Finland, so there is no reason why it will not work in the UK.”
This could prove to be a real vote winner with the electorate, many of whom have seen the day at which they can retire getting further and further away. If the pension freedoms taught us anything it’s that flexibility is hugely popular and allowing people an element of control over when they can access their state pension is a shrewd move from Ukip.
Personal pensions advice
“With greater freedom over personal pensions comes individual responsibility for retirement finance planning. Historically, people have had limited options of when to draw down funds from their personal plans. Most were forced to take out an annuity, paid out evenly, over the course of their retirement. Pensioners will now be making complex decisions about when and how much to take from their pension pots and, before doing so, they need expert advice to make sound, well-informed choices.
“All pensioners get from the current government is 45 minutes of advice provided by the Pensions Advisory Service or Citizens Advice Bureau. This is completely inadequate when potentially lifechanging decisions are at stake.
“UKIP will fund a higher standard of independent advice available to all pensioners. We will double the budget for guidance in 2015/16 from £30 million to £60 million, and treble the 2016/17 budget from £10 million to £30 million. In consultation with bodies such as the Chartered Insurance Institute and the Personal Finance Society, we will develop a pensions advice and seminar programme that will help protect pensioners’ best interests and savings.”
In another move likely to be popular, Ukip have pledged to provide better advice to members at the point of retirement. This has been a sticking point for the industry at large, which has been extremely worried about retirees making poor choices as a result of the new freedoms.
For many, 45 minutes of advice to deal with 45 years of savings is likely to be inadequate, particularly when people are getting guidance rather than full blown advice, and Ukip are promising to deal with this.
Stopping the scams
“A further concern is that pensioners with limited financial experience may become the victims of mis-selling when they cash in their pension pots and have access to potentially large sums of money. To prevent mis-selling, UKIP will make it a criminal offence to cold call someone in respect of their pension arrangements. This will not affect regulated advisors or pension schemes where there is already an existing relationship with a client.
Rogue, unregulated operators must not be allowed to take advantage of pensioners while lining their own pockets.”
This is a bold move and will be welcomed by trustees who are worried about being held responsible if members are scammed. It will also be hugely popular with the general population, who are sick of being cold-called.
Of course, it’s hard to see how enforceable this will be in reality.
It’s not clear whether or not Ukip will protect the triple lock, however the manifesto does refer to it as a “welcome reform” so we can infer that it would be here to stay should Ukip form part of government. This is in line with all the other major political parties.
“We will keep free bus passes, winter fuel allowances, free TV licenses for the over 75s and free prescriptions and eye tests for the over-60s, without means testing.”
Good news for pensioners, but in line with most other political parties, except the Lib Dems and the Labour party both of which would restrict benefits for higher rate retirees.
“On 8th November 2014, the Government announced that war widows and widowers would receive a war widows’ pension for life, even after remarriage, with effect from April 2015. However, this change was not retrospective and is therefore manifestly unfair. We will give all war widows and widowers a war pension, regardless of when they may have remarried.”
“The current anomaly in the Armed Forces Compensation Scheme will be rectified, so no veteran has to use their war pension to pay for social care, whenever they were injured.”
This will be welcome news and is in line with Ukip’s general protection and promotion of the armed forces.
This is a surprisingly forward-looking manifesto from Ukip, and has a number of policies that are likely to be extremely popular. A far cry from the 2010 pensions policy document authored by Godfrey Bloom, David Lamb and Mark Wadsworth.
Bearing in mind that back in August 2014, ex-head of policy unit Tim Aker told Prospect Magazine “I have, and then got very scared and ran away,” when asked about pensions policy, this has been a huge positive shift for the party.
Of course, it’s impossible to talk about Ukip without mentioning the big elephant in the room: the EU referendum. Should a referendum go ahead and gain a successful ‘out’ vote, there would be huge implications for both pensions policy and investment strategy.