Ros Altmann says as the government battles Brexit and political instability, pensions are unlikely to top its priority list.
The Tory manifesto policies on state pensions and social care may have cost them their majority. While other parties promised more pension spending, they suggested means-testing winter fuel payments (WFPs) and taking away accumulated wealth, including homes, if they were unlucky enough to need later life care.
Despite promising to keep the triple lock until 2020 and move to a double lock thereafter (which would ensure pensioners have better protection than any other group) the impact of the manifesto was disastrous on the doorstep. Having realised how politically poisonous this was, appetite for major pension reforms is likely to be low.
Thankfully, means-testing WFPs will probably not proceed, and no announcement on the triple lock is needed, as all parties pledged to keep it until at least 2020 and inflation is well above 2.5%. However, outstanding pensions policy issues that were interrupted by the election will need attention when Parliament returns.
A response to the Cridland Review on State Pension age increases is overdue. Labour's manifesto suggested abandoning planned rises to age 67 by 2028, for a more flexible age policy to recognise differential life expectancy or health. Cridland suggested a one-year window for means-tested early access. The government will probably leave this to a future Parliament.
The auto-enrolment (AE) review must report this year. Many hoped it might recommend increasing coverage, perhaps finding ways to include the self-employed, broadening the band of earnings on which contributions are levied, lowering the £10,000 earnings threshold, or even increasing contribution levels. With post-election, pre-Brexit economic uncertainty, government will not want to put more burdens on business, so these are probably off the table for now.
New secretary of state for work and pensions, David Gauke, is from the Treasury, who I worked closely with on the 2016 tax relief consultation as pensions minister. He favoured changing upfront tax relief to an ISA structure, and was a fan of Lifetime ISAs. He believed people don't like pensions but do like ISAs, so why not turn pensions into ISAs. I vigorously opposed this and explained how it would risk pushing more future pensioners into poverty.
A classic case of short-term political thinking causing long-term damage to pensions, when today's politicians won't have to deal with the consequences. Pensions have appropriate incentives to keep money for much later life, whereas ISAs incentivise spending everything around age 60. Longer 21st Century retirements mean people need money for their 80s and 90s, not just their 60s. I hope incentives might move to a clearer flat-rate upfront bonus, but that's probably wishful thinking.
Despite talk of a pensions crisis, there is some basic state support and billions of pounds in private pensions. But with social care, neither government nor individuals have set money aside. Pension income can finance independent living, but once someone needs care, more money is needed to cover much higher living costs. Our system has no incentives to encourage saving for care; this must urgently change.
Government will issue a green paper or preferably establish a cross-party commission on social care funding reform. Measures could include capping maximum care costs, higher means-test threshold, incentives for workplace care savings, IHT-free Care ISAs, tax-free pension withdrawals for care, charges on people's estates and some national insurance for social care, alongside state pensions and NHS.
Finally, the DB green paper needs a response, which may not come quickly, but could include greater powers for The Pensions Regulator to demand information or, in special cases, to force more funding and encourage pooling and improved governance. Relaxing annuity requirements, less emphasis on gilt investments and reduced indexation are possible, but less likely.
As the new government battles Brexit and political instability, pensions will probably not top the priority list.
Baroness Ros Altmann is a former pensions minister
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