Home Money What will the election mean for your pension? Is the state pension safe with triple lock?

What will the election mean for your pension? Is the state pension safe with triple lock?

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Elections underway: What pension promises will be made and kept?

Elections underway: What pension promises will be made and kept?

A comfortable retirement will be on most voters’ wish lists, even if it’s not often cited as a top political priority in polls.

The Conservatives and Labor will do everything they can to reassure people that their financial prospects are secure on their watch during the general election campaign.

But in a time of tight public finances, both parties will also look to raise cash to fund their top priorities wherever possible in the future.

We look at the promises they’re making about pensions, what they’ll avoid talking about during the campaign, and what they might actually do after the polls close.

Find out the big problems facing pension savers and retirees.

State pension triple lock

Labor and the Conservatives promised even before the election was announced that they would maintain the “triple lock” on state pensions throughout the next parliament.

This is an indication of how seriously they take the fight for the support of older people, who tend to vote in greater numbers than the rest of the electorate.

The triple lock means the state pension is set at the highest inflation, average earnings growth or 2.5 per cent.

Pensioners should therefore continue to receive decent increases in their payments each year until almost the end of the decade.

Thanks to a popular pledge, older people got an 8.5 per cent rise in their state pension in April, raising the headline rate to £221.20 a week or £11,500 a year.

The basic state pension for those who retired before 2016 has increased to £169.50 a week or £8,800 a year. However, older pensioners often receive hefty top-ups, via S2P or Serps, if they earned them during their working life.

Pensions industry experts are divided over the triple lock. The 2.5 percent element continues to raise the rate, even in years when profits and inflation remain stable.

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Do you think that the party that wins the elections will keep the promise of the triple blocking of state pensions?

  • Yeah 487 votes
  • No 973 votes

Critics point out that it is expensive and that pensioners tend to receive more generous treatment than the working population.

However, workers have recently seen big cuts to National Insurance which pensioners have not benefited from, although admittedly this is because it does not apply to people once they reach state pension age.

Meanwhile, triple lock supporters say many older people are relying solely on the tiered pension and are struggling to pay food and energy bills after a nasty bout of inflation.

The UK also has the lowest state pension among rich countries, according to one of the most cited international measures, although that doesn’t tell the whole story because some nations integrate their state and workplace schemes into a single system.

The Conservatives broke the triple lockdown once during the pandemic, when they could credibly claim special circumstances, and either side is unlikely to risk the wrath of pensioners by doing so again. Do you agree? Take our survey.

State retirement age

To deal with the triple lock bill, the next government may have to bring forward increases in the state pension age, penalizing current workers who fund pay increases under the triple lock.

The state pension age is already scheduled to increase from 66 to 67 between 2026 and 2028.

In 2028, the minimum retirement age to access the workplace and other private retirement savings will also increase, from 55 to 57 years.

The timing of the next increase to age 68 is officially assumed to occur between 2044 and 2046, which would affect those born after April 1977.

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Several reviews have been carried out, but the Conservatives ultimately postponed the decision until the other side of the election.

The reason cited was the current level of uncertainty over data on life expectancy, labor markets and public finances.

During the campaign, both parties will likely do their best to avoid this issue for fear of irritating voters in their 40s and 50s.

lifetime allowance

The Conservatives and Labor could be at odds over the recent abolition of the £1,073,100 lifetime allowance, the total limit people can have in their pension pot without facing tax penalties.

Labor initially said that if elected they would bring him back, but then fell silent on the issue. We’ll probably have to wait for his manifesto to find out more.

There is a possibility that the party will specifically allocate any money it raises from wealthy pension savers to fund other priorities that voters are likely to find more valuable: school meals for children, training for nurses, extra police officers, etc.

And they could try to create an exemption for at least some essential public sector workers, such as doctors and judges, but this would be contentious and difficult to implement.

Labor could still abandon the reinstatement idea to retain the goodwill of doctors whose support they need to reform the NHS.

Meanwhile, the rules inherited after the abolition of the lifetime allowance are complicated, especially regarding tax-free lump sums.

If you already have a large sum saved in a pension, you should seek financial advice from a professional to avoid costly mistakes.

Investment in pensions

Both main parties are likely to follow Chancellor Jeremy Hunt’s Mansion House plans to use people’s pension savings to help boost the UK’s economic growth.

Labour’s shadow chancellor Rachel Reeves has expressed similar sentiments about unlocking pensions to support the economy, so she is expected to continue with some version of Hunt’s plan should she succeed him at the Treasury .

Reeves is planning a major pension review if there is a change of Government.

It is unclear how far this could go, but an attack on pension tax relief – something successive Tory chancellors have avoided – could be on the table as a major source of cash for other cherished projects.

The generous pension tax relief system is based on personal income tax rates of 20 per cent, 40 per cent or 45 per cent, which tilts the system in favor of the better off because they pay more tax.

Rumors about reform generally revolve around the introduction of a flat rate, where higher and additional rate taxpayers will receive a reduced level of relief, and basic rate taxpayers will get the same or slightly more than now.

A government would be stingier about setting a new single rate if it was trying to save money, and then it could probably raise and lower it virtually at will.

Meanwhile, the fate of a consultation on giving workers a single “lifetime pension fund” into which they and all employers can continue to save throughout their careers is uncertain.

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