4 ways Jeremy Corbyn’s Labour could affect your pension
All eyes have been on Labour’s new leader Jeremy Corbyn recently, with opinions divided. Certain policies have already been widely noted, but would there be further pension reform under a Corbyn government?
Earlier this year we looked at how pensions could be affected by the general election, highlighting the pension policies in the manifestos of the Conservatives, Labour, Liberal Democrats, UKIP and the Green Party. Labour had also announced it intended to reduce the annual allowance for higher earners, from £40,000 to £10,000, in order to fund a reduction in tuition fees.
Now under leadership of Jeremy Corbyn instead of Ed Miliband, what could a Labour victory in 2020 mean for pensions?
Here are four possibilities:
Flexible State Pension age
The State Pension age is currently changing, with the aim of being 65 for both men and women by 2018. Writing for the Telegraph,1 Jeremy Corbyn argued that “living longer doesn’t mean we are able to work longer in physically demanding jobs … so we need a flexible pension age that allows people to work for as long as they want to.”
Such a policy change would allow people with ill health, disabilities or who were unable to perform their job to claim the State Pension earlier, but this policy would need careful consideration to ensure that it is not easily taken advantage of and fair, so those who work longer do not feel hard done by.
Changes to the new pension rules
The pension freedoms took effect in April of this year and provide more flexibility than ever before when it comes to accessing your pension money. Owen Smith, Labour’s new shadow work and pensions minister, is concerned that a mis-selling scandal could be caused due to “financial sharks”,3 so there could be a tightening of the flexibilities offered or perhaps a bigger campaign to keep people safe.
This may be in response to scams, as pensions may be targeted more now that over-55s are able to empty their entire pension funds if they wish. The best way to protect yourself from a scam is to know how to identify scammers from legitimate financial advisers.
When the new pension rules were announced in 2014, the government also introduced Pension Wise, a free guidance service. There is a difference between financial guidance and advice, and Pension Wise helps people understand the available options rather than explain the best option for individuals.
Nick Thomas-Symonds, Labour’s new shadow pension minister, wants to see the service expanded and the government to take a larger role in helping retirees make decisions.2 This would include more work on explaining the pension reforms to people, but it has not been disclosed whether regulated advice would also be offered instead of simple guidance.
Reform to auto-enrolment’s earnings threshold
Further pension reform may not be just for the people old enough to access their funds. In addition to increasing the scope of Pension Wise, Labour’s shadow pension minister also stated he is “concerned about auto-enrolment, and whether people are being missed.”2
Details on how auto-enrolment’s eligibility criteria could change have not been announced, but Rachel Reeves, the previous shadow work and pensions secretary, suggested last year that it should be linked to the national insurance lower earnings limit, which at the time was £5,773.4
Although the details of what would change are currently unclear, it seems apparent that further pension reform would take place.
What changes would you like to see, or are the new pension rules adequate? Let us know with a comment below.
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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new
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