On Friday 8th May, following one of the most talked about and uncertain General Elections in a long time, the Conservatives swept the board in an unexpected win to gain power for the next 5 years.
This time around, without a Liberal Democrat coalition the Conservatives have the power to run the country unrestricted by the other parties. While protests started in London just 24 hours later, calling for David Cameron to leave Downing Street and a new democratic system to be put into place, we looked at just what difference a Tory government could mean for your retirement over the coming half a decade.
In his 2014 Budget Speech the Chancellor, George Osborne announced the biggest reforms to pensions and how we can access them in almost a century.
Lifting restrictions on processes such as income drawdown, from 6 April 2015, retirees can access their entire pension funds however they see fit. This means nobody is forced into using their fund for the purchase of an annuity – though for many it will still likely be the most secure option, and it’s worth calculating your annuity rate and speaking with a financial advisor to check.
The chancellor worked on the pension freedoms with former Liberal Democrat Pensions Minister Steve Webb, but with Webb now gone, and George Osborne looking to hold an emergency budget imminently, we could see additional reforms being announced in the coming weeks or months, to fit more in line with the Tory’s vision.
Amongst all of the main party’s policies was a promise to keep the ‘Triple Lock’ state pension.
The Triple Lock formula is that the state pension will continue to rise year-on-year. This will either be in line with inflation, earnings or at a flat-rate of 2.5 per cent, whichever is higher in that financial year.
The conservative government will keep the Triple Lock formula, which is good news for pensioners – though a policy that would have been in place whichever of the main parties made it to power.
There had been some major debate over certain pensioners benefits during the election campaign and within many party’s manifestos.
The Winter Fuel Allowance, alongside free pension bus passes and TV licenses is currently available to all pensioners, no matter their financial situation. The Labour party felt that it was an unnecessary expense to provide the highest earning 5% of pensioners with these benefits when they likely would not require the extra assistance, looking to use the money earned in more desperate areas.
The Conservative government however, will keep these benefits free for all pensioners, meaning a Winter Fuel Allowance of between £100 and £300 per year, a free bus pass and a free TV license.
Inheritance Tax Relief
In the build up to the 2015 Budget Speech, documents leaked that outlined plans to increase Inheritance Tax relief on properties up to £1million.
Currently the rules of IHT mean that each individual can pass on up to £325,000 to beneficiaries without the capitol being subject to the tax; this can be combined with a spouse up to the value of £650,000.
The leaked documents showed that they wanted to add an additional IHT allowance on a person’s main property up to the value of £175,000. Again, combined with a spouse this means properties up to £1million could be passed onto a beneficiary completely free of IHT.
This could be one of the main points George Osborne looks to outline in his emergency budget.
Over the next 5 years of Conservative rule, things for pensioners individually are looking rather rosy – though no matter which party took power, pensioners were never likely to suffer, and would always have done well.
It will be interesting to see though just what changes the Conservatives might implement, which, if any of their policies they divert from, and just what the UK cultural landscape will look like in three, four and five years’ time.