Pensionline News Bulletin 4

The beginning of April saw the much previewed official announcement of the forthcoming general election on 6 May 2010. What are the three main parties saying about pensions in their manifestos?

The Labour Party had promised an increase in the basic state pension of 2.5% in 2010 and has restated its commitment to restoring the link with earnings in 2012. They will review the default retirement age with a view to allowing people to work longer.

The Conservatives have also said they will increase the basic state pension in line with earnings, though they haven't said when. On pensions saving, they talk about reinvigorating occupational pensions and working with employers and industry to support auto enrolment. They may bring forward the increase in state pension age from 65 to 66 (currently planned for 2026).

The Liberal Democrats have said they would restore the link to earnings for the basic state pension immediately. They would would uprate the state pension annually by whichever is higher, the increase in earnings, prices or 2.5%. They would remove the compulsory or default retirement age so that individuals could carry on working as long as they wish. Controversially perhaps, they have said they will restrict tax relief on pension contributions to basic rate. Longer term, they would introduce a Citizen's Pension set at the same rate as pension credit for all UK citizens who are long term residents.

On the same day the election was announced, the CBI issued a press release lobbying for an end to 'unaffordable' final salary pension in the public sector. Maybe not surprising then that all the main parties make some reference to reform of public sector pensions to ensure they remain 'sustainable and affordable'.

Phil Collins - Partner
For and on behalf of Hillier Hopkins LLP
01923 232938