This morning’s shock UK general election result is likely to impact on both financial advisers and their clients as the general pensions landscape, that affects UK pension fund holders all over the world, is thrown into a ‘period of uncertainty’, according to Nucleus Financial.
After a “tumultuous election”, the UK political scene appears less than stable and any coalition is likely to provide a “legislative roadblock”, according to Rachel Vahey, product technical manager at Nucleus Financial.
“Although a Conservative/Democratic Ulster Unionist coalition appears on first glance to be the most the likely outcome, any coalition will be built on fragile ground, and will undoubtedly slow down and even roadblock the legislative process,” said Vahey.
“With it being cut from the latest Finance Act, there is now the question whether the reductions in the money purchase annual allowance (MPAA) and the tax-free dividend allowance will make it into law this year.
“This places advisers and their clients in limbo, trying to work out how much the MPAA is for 2017/18 tax year – £10,000 or £4,000. But the longer this hiatus lasts, the less likely it seems that the government can backdate this piece of legislation to the start of the tax year when – or if – it is eventually passed.
“After kicking the Cridland Review of state pension age into the long grass, in the run-up to the election, it will prove very difficult for the new government to pick up this particular change.”
Labour opposition to state pension age increase
During the course of this minority party government, however long it lasts, there could still changes to the lifetime allowance or annual allowances, despite a Conservative and DUP coalition having just a handful of seats in in their joint majority. Although any increase to a UK state pension age increase is unlikely as Labour will oppose it.
“Labour will no doubt oppose any increases to state pension age – in their manifesto they favoured freezing it at 66 – and so we can expect no new proposals,” added Vahey.
“Pensions tax relief is another area which is likely to be consigned to the back burner. A proposed big ticket switch to, say, a single rate of tax relief will probably not get the parliament time or focus. But this still gives the new government wriggle room for more tinkering, and changes to the lifetime allowance or annual allowances cannot yet be ruled out.”