Pension political football game finally kicks-off!
Well, it’s finally warming up on the pension front as we rapidly approach the general election on May the 5th. I said last week that I’d keep you up to date with any pension stuff that makes it on to the political stage in this campaign, but I suppose there’s not much you don’t know already as it’s been all over the papers now for a day or so. Still, a promise is a promise…
Up until a few days ago it was beginning to look like the Labour Party’s long-term policy on pensions – a promise to read the Turner report later this year, but to do nothing for long-term reform during the life of the next parliament – was defensive enough to force a boring nil nil draw that the crowds probably wouldn’t bother watching. Well, that scenario was blown away a bit by the Conservatives announcing that, if they’re elected to lead us, they would immediately introduce some new incentives to encourage basic-rate taxpayers to save in pensions.
The big one of these, of course, is the commitment to give basic-rate taxpayers an extra £10 for every £100 they invest in a pension. Put another way that’s giving 32% tax-relief to people who only pay 22% tax, so it seems a pretty good deal to me and a compelling reason why people who currently don’t save might consider doing so if it ever comes off. We’d still have the problems caused by the fact that the means-tested benefits available to pensioners make pensions unsuitable investments for millions in the UK workforce, but the Conservatives, in a dazzling one-two outside the penalty box, also pledged to re-establish the link with earnings increases to the State Basic Pension and eventually do away with the means-test, so it’s got the crowd’s interest. They’ve also made a commitment to remove the antiquated notion that we must buy an annuity when we’re 75 (I understand that anachronism was introduced way back in 1888!) If that goes in it could be a spectacular 35-yarder!
Anyway, the Labour response to this sudden run up the pitch by the Conservatives with the pension football at their feet, was nearly a spectacular own-goal. In a recent speech, Tony Blair seemed to say that if the end game of the Turner report led to the implementation of a so-called Citizen’s Pension then it too could be means-tested. That didn’t actually go into the net thanks to some nifty recovery work by a defender issuing a statement promising that the party would not subject the state pension to a means-test, and thereby just getting a toe on it before it went over the line. The goalkeeper was nowhere!
The defence is still having trouble clearing the ball, though, with Tony Blair apparently saying at a press conference yesterday that he had ruled out pension compulsion as an option, but with his Minister of State for Work and Pensions, Alan Johnson, saying just hours later on TV that it wasn’t ruled out as party policy. So there’s plenty of action here to keep the spectators engaged, even though we haven’t seen a goal yet. It’s beginning to look like one’s coming.
In a reversion to type, I can’t resist just adding a nerdy bit of detail about the Conservative plan to give this extra £10 for every £100 saved by basic-rate taxpayers. It seems it won’t be available to all payments in respect of 22% taxpayers, but will exclude contributions made on individuals' behalf by employers, and those made to unfunded public sector pension schemes. So there’s something you can slip into your dinner party conversation this weekend if you get the chance.
Also, and to finish off this particular BeeLine, you’ll notice that we’ve included a cartoon for you from the Planet Stakeholder series. I drew it last week when I was pretty sure pensions was just not going to come up in the run up to the election, but I wanted to include it here anyway just to show off the fact that the new BeeHive lets us combine words and cartoons. I’ll be doing a lot more with that particular facility as the year goes on. You have been warned!
19 April 2005
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