All change for pensions in 2020?

The Conservative party did just enough to slightly raise its vote share above the level of 2017, while the Labour party’s electoral coalition fractured. Boris Johnson now has a majority of 80 and a considerable personal mandate. 

There have been several different versions of Boris Johnson, and an easy slide from one role to the next makes it difficult to judge how he will govern based on his past performance. The pensions sector can, though, make a few judgment calls from the Tory manifesto, and also from the pressures the prime minister will face in his first months in office. 

Pensions will not be his immediate priority, which is the passage of the withdrawal agreement and the UK’s final exit from the EU on January 31. From that point on, we can expect some but not all of the political heat to go out of Brexit.

The pensions sector needs those on the opposition benches to get back on the horse quickly and provide the scrutiny good legislation needs

Pension schemes bill to return

We expect a swift return for the pension schemes bill and for the Department for Work and Pensions to press ahead with the topics the legislation will enable, like collective defined contribution schemes for Royal Mail and the pensions dashboard. We hope the promised review of the net pay/relief at source issue, where low earners miss out on tax relief, will be announced in the forthcoming spring Budget.

The one thing that did not make it into the Conservative manifesto was the conclusions of the 2017 review of auto-enrolment. The assessment suggested dropping the age threshold for auto-enrolment to 18 and increasing contributions by removing the lower qualifying earnings band. We hope these sensible measures will reappear in the government’s policy agenda.

The longer-term options for increasing minimum contributions are harder to discern. There is a consensus within the pensions sector that 8 per cent of earnings is not enough, and a figure closer to 12 per cent is required.

That consensus has yet to spread out of the sector and is in tension with other economic pressures the government needs to manage: chiefly the cost of living. It is at this point that the nature of the Conservative win begins to matter. The Tories now represent both leafy and prosperous parts of the South East, and former mining areas that have had a much rougher time over the past 30 years, where their new constituents face serious hardship.

More discussions on tax relief to come

Last for the Conservatives, the government has the majority but not the mandate to contemplate a serious reform of pensions tax relief. This issue has laid dormant in the Treasury since the failed George Osborne attempt to reform the tax break in 2015.

With pensions tax relief worth £37.2bn gross and £19bn net, this may just be too tempting for a government that needs to turn on the public spending taps without raising taxes, in a way that affects people in the here and now.

With the majority that the Conservative government now has, the opposition risks becoming much less relevant, and we risk a situation where policy debate takes place largely within the governing party.

Given the technical nature of pensions legislation, the pensions sector needs those on the opposition benches to get back on the horse quickly and provide the scrutiny good legislation needs. That is going to matter when the fine detail of the schemes bill comes through to second reading, presumably early next year.

So, all change and no change. We expect continuity but also see the scope for long-term change in the sector. No one should think pensions policy is going to be any less busy.

Gregg McClymont is director of policy at The People’s Pension