Financial News

Election May Unpick State Pension Triple Lock

Financial plans for millions relying on the state pension to see them through their later years are in disarray due to the General Election 2017.

Prime Minister Theresa May’s snap poll caught many u8nawares – including retirement savers.

Their financial plans are based on the government continuing with generous triple lock state pension increases until 2020.

Former Prime Minister David Cameron pledged the lock would be reviewed at the end of Parliament in June that year.

But with an early election, many fear May will axe the triple lock because funding state pension rises under the promise has become too expensive.

State pension costs soar

The triple lock guarantees a rise in the state pension each year by the inflation rate, any rise in average earnings or 2.5%, whichever of the three is the greatest.

The government fears the state pension is becoming unaffordable.

The Treasury estimates the pension costs 5.2% of GDP currently, and that this will rise to 6.2% by 2036 even though the age payments start is rising.

Reports have suggested the state pension rises cost every household in the country £725 a year and keeping the triple lock after 2020 means state retirement age will have to overtake average life expectancy in some areas.

Wealth managers expect the triple lock and state pension to become important factors in the General Election.

Richard Parkin, head of pensions policy at fund managers Fidelity, said: “I expect triple lock and pensioner benefits in general to become an election issue as Mrs May could feel she can be tough without alienating too many voters.”

Tax fears

Steven Cameron, Aegon’s Pension Director commented on disruption to the Finance Bill as country readies itself for another election.

“As expected, the snap election is having ramifications on the legislative timetable with the government’s rushed descoping of the Finance Bill the latest example. While the election may bring aspects of government to a temporary halt, life outside government continues as normal, and urgent clarity is needed on what those elements dropped from the Bill mean to savers and employers.

“Another casualty is employer funding up to £500 of advice for employees. Some employers will already have included this into employee benefit packages and we again need urgent confirmation that anyone who has already received this will not be taxed on this as a benefit in kind.”

Leave a Comment