Roger Harding, associate at Cicero Consulting - parliamentary consultancy to financial services companies - analyses the election manifestos of the three main parties and reveals what he thinks they really mean.
Last week saw the start of the General Election campaign proper as each party set out their policy proposals for Government.
The Conservatives started on Tuesday with a lone Michael Howard launching their thinnest manifesto since 1966. Tony Blair, accompanied on stage by his entire cabinet, followed on the Wednesday to launch Labour’s “Little Red Book”, and finally the Lib Dems brought up the rear with blurry-eyed new father, Charles Kennedy, launching their newspaper-style effort.
Given the demographics of the ‘certain to vote’ polling group, all eyes were on the parties’ state pension proposals.
Labour avoided any last-minute flourishes to stick to their 'wait until Turner' policy – a politically risky move as Labour increasingly binds itself to the recommendations of the final Turner report.
Given the manifesto’s relative silence on pensions, commentators have spent more time trying to read between the lines.
Adding to Alan Johnson's favourable remarks about the Citizen's Pension, the manifesto notes that any reform to the state system would have to be both simple and favourable to women. Equally, their March policy document noted that they would be “looking at whether a residence-based (as opposed to contribution-based) eligibility for the basic state pension would provide a cost effective way of improving entitlements”.
The Conservatives’ main state pension promise is to re-index the basic state pension to earnings. They will maintain the Pensions Credit but hope that a rising BSP will gradually lead to less means-testing.
Surprisingly, the document was silent on any specific pledges to help female pensioners, who traditionally lose out because of the BSP contribution rules, though previous policy documents have suggested they would end the ten-year BSP contribution rule.
The Lib Dems have been, in contrast to Labour, very up front about their policy. They pledge a Citizens Pension of £109, tied to earnings, for all those over 75, with a view to further extending this to all pensioners.
There was also something for the current pension saver to chew-on. The biggest announcement came from the Tories this Monday as they promised a further tax incentive for retirement savings.
Under their plans, any person earning below the higher income tax threshold who makes a contribution to their private pension would gain an extra 10p Government contribution for every gross income – post-current tax relief pound saved – effectively meaning for every net income pound a basic rate tax payer saved they will receive a further 41p Government contribution.
The Tories have also pledged to create a ‘Lifetime Savings Account’. Their manifesto notes that each account will be subsidised by some form of Government matching, and previous policy documents suggest that the account would be more flexible than pensions to allow withdrawals in times of financial difficulty.
This follows the Treasury’s own matching pilots, the ‘Savings Gateway’, aimed at the “financially excluded”, but it is unclear whether the Tories LISA account would aimed at a similar audience, or be universal.
Labour in their March policy document also pledged that they would be “encouraging the development of new savings vehicles which give people the chance to combine the benefits of Isa and pension saving”.
Adding to the mix, the Lib Dems have noted they would get National Savings to provide a cheap, consumer-trusted, pension product and that they would consider scrapping SERPs, all of which seems to add up to shaky future for the Stakeholder Pension.
Further, both Labour and the Tories have noted they will encourage employers to make their company pension schemes ‘opt-out’ rather than ‘opt-in’, while the Lib Dems have gone one further by noting they would make auto-enrolment compulsory.
Both the Lib Dems and the Tories have also pledged to scrap the compulsory annuity rule, while Labour has agreed to review the situation.
And earlier this week, Tony Blair ended speculation on compulsory pension saving by noting any decision on this would have to be put before the electorate in a general election.
On housing, Labour's manifesto further promotes the work done by the ODPM to increase shared equity schemes for local housing and the chancellor's changes to stamp duty, while the Tories have stuck to their core policy of the ‘right to buy’, but wish to see it extended to cover housing association stock as well as following the government in wanting to promote the further use of shared equity.
The Lib Dems have pledged to top the current chancellor and raise the lower stamp duty threshold to £150,000, and their housing policy is based on mutual housing whereby first-time buyers can buy shares in a local housing fund to generate the funds needed to buy on the open market.
Finally, we come to the election favourite of general taxation. Labour has once again pledged to leave the upper-band of income tax alone, while the Lib Dems have pledged to introduce a new 50% rate for those earning above £100,000.
And both Labour and the Tories have not ruled out National Insurance increases, citing the need for Government flexibility in the unpredictable four or five years of economic management ahead.
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