While Brexit is clearly sucking up huge amounts of policy time and resource, there remains a significant domestic reform agenda for the Government to undertake.

Unfortunately Theresa May’s dramatic loss of power following the general election means a number of vital retirement reforms were watered down or simply not mentioned in last week’s Queen’s Speech.

Ageing society – reforming the state pension

The ageing society is arguably the key challenge facing policymakers. Nowhere is this demonstrated more clearly than in the rising cost of the state pension.

The Institute of Fiscal Studies estimates the state pension will cost an extra £30bn in today’s terms in 50 years’ time.

As part of a programme to control these costs, the Conservative manifesto proposed scrapping the triple lock – which guarantees yearly increases in line with the highest of earnings, inflation or 2.5% – and replacing it with a double lock to earnings and inflation.

Furthermore, an independent report produced prior to the election backed a raise in the state pension age much faster than under current plans.

Reports suggest the triple-lock will now be retained as part of a deal with the Democratic Unionist Party, while Labour’s opposition to the proposed state pension age hike means this vital area of reform faces short-term political deadlock.

This state pension system is unsustainable over the long-term and, at some point, someone will need to either reduce the amount people receive or increase the qualifying age.

Unfortunately the Prime Minister has a wafer thin majority so bold, necessary reforms to increase the state pension age risk being kicked into the long grass.

MPAA and pension scams clampdown

With all the noise surrounding Brexit negotiations it’s easy to forget vital domestic personal finance reforms need addressing.

Savers who access their pension flexibly from age 55 are subjected to a lower annual tax-free pension saving allowance, known as the Money Purchase Annual Allowance (MPAA).

The Government announced a cut in the MPAA from £10,000 to £4,000 effective 6 April this year – but the legislation to make this happen was never enacted, meaning it is not clear which figure applies this year.

People who have used the pension freedoms need urgent clarity on this issue so they know how much they can put into
their pot tax-free in the current fiscal year.

We are also still waiting for the Government to implement a crucial clampdown on pension scammers, including a ban on cold-calling. These are incredibly important consumer protection measures that must not be further delayed.

Tom Selby,

Senior Analyst, AJ Bell

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