13th June 2017 by Steve Herbert
I must admit that I really didn’t see the election result coming. I’m still rather stunned that the Conservatives managed to lose both a commanding lead in the polls, and a workable majority in the House of Commons, in the space of just a few weeks.
Whilst we are on the subject of unexpected outcomes, neither did it occur to me that the Democratic Unionist Party (DUP) would be the potential King-makers when the results were finally in. So – once the traffic to their website had slowed down – I sought to catch up on the DUP’s manifesto commitments.
It will come of no surprise to those that have read my column of late that my main focus was to establish the DUP’s manifesto position regarding the important (and presumably ongoing) debate around pension tax relief. In particular I was looking for some insights as to their thoughts around the thorny subject of reducing the levels of such relief for higher-paid savers.
So what do the DUP have to say on this key issue?
Not a lot is the honest answer. The entirety of their manifesto commitments on pensions amounts to not much more than a couple of tweets worth of text. And although the state-pension “triple lock” does get a mention, there is no reference whatsoever to the subject of changes to pensions tax relief.
So where does that leave the Chancellor? At first glance the lack of any overt mention by the DUP on this topic suggests that Philip Hammond could safely look at this issue in his first Budget speech following the General Election. And, given the potential savings to the Treasury of doing so, I am quite sure this is a topic which remains firmly on the Treasury radar.
But that is only one facet of the debate.
On the other side of the coin we have a Government – and indeed Prime Minister – in a deeply precarious situation. It is a political fact that a minority government simply must avoid controversy within its own ranks if the administration is to survive for any length of time. And here is the rub; in Conservative circles the subject of pension tax relief changes remains a controversial one, and therefore possibly a subject not to be directly addressed just at the moment.
So, if things stay as they currently are, then it may well be the case that the long expected wholesale changes to pensions tax relief will once again be delayed until an unspecified later date. But less controversial measures to further limit the costs of tax relief for the high-paid by reducing the Annual Allowance could potentially still be introduced without arousing the same levels of unease and opposition. Indeed this approach might be a more viable short-term aim for the Chancellor with the uncertainties of Brexit lurking just over the horizon.
Its early days to speculate which way things will go, but you can be assured that the pensions industry – and many savers – will be watching the next steps in this complex debate with a keen interest.
Steve Herbert is Head of Benefits Strategy at Jelf Employee Benefits